The WACC of Landi Renzo SpA (LR.MI) is 8.9%.
| Range | Selected | |
| Cost of equity | 13.10% - 15.70% | 14.40% |
| Tax rate | 25.40% - 38.70% | 32.05% |
| Cost of debt | 4.00% - 7.00% | 5.50% |
| WACC | 7.9% - 9.8% | 8.9% |
| Category | Low | High |
| Long-term bond rate | 4.3% | 4.8% |
| Equity market risk premium | 8.8% | 9.8% |
| Adjusted beta | 1 | 1.06 |
| Additional risk adjustments | 0.0% | 0.5% |
| Cost of equity | 13.10% | 15.70% |
| Tax rate | 25.40% | 38.70% |
| Debt/Equity ratio | 1.07 | 1.07 |
| Cost of debt | 4.00% | 7.00% |
| After-tax WACC | 7.9% | 9.8% |
| Selected WACC | 8.9% | |
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 LR.MI:
cost_of_equity (14.40%) = risk_free_rate (4.55%) + equity_risk_premium (9.30%) * 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.