The WACC of Deutsche Lufthansa AG (LHA.DE) is 6.4%.
| Range | Selected | |
| Cost of equity | 7.90% - 11.40% | 9.65% |
| Tax rate | 16.20% - 17.50% | 16.85% |
| Cost of debt | 4.00% - 6.40% | 5.20% |
| WACC | 5.1% - 7.6% | 6.4% |
| Category | Low | High |
| Long-term bond rate | 2.8% | 3.3% |
| Equity market risk premium | 5.1% | 6.1% |
| Adjusted beta | 1 | 1.25 |
| Additional risk adjustments | 0.0% | 0.5% |
| Cost of equity | 7.90% | 11.40% |
| Tax rate | 16.20% | 17.50% |
| Debt/Equity ratio | 1.6 | 1.6 |
| Cost of debt | 4.00% | 6.40% |
| After-tax WACC | 5.1% | 7.6% |
| Selected WACC | 6.4% | |
The Cost of Equity reflects the return a company needs to deliver to shareholders to justify the risk of investing in its shares. It’s computed using the Capital Asset Pricing Model (CAPM), which blends the risk-free rate, the stock’s beta, and the market risk premium.
This method evaluates the stock’s risk compared to a safe investment and the market’s overall volatility.
Here’s how we figure out the cost of equity for LHA.DE:
cost_of_equity (9.65%) = risk_free_rate (3.05%) + equity_risk_premium (5.60%) * adjusted_beta (1) + risk_adjustments (0.25%)
We include the risk adjustments, which range from 0% to 1%, to keep our WACC conservatives, especially for companies traded in developing markets.