The WACC of Lar Espana Real Estate SOCIMI SA (LRE.MC) is 7.9%.
| Range | Selected | |
| Cost of equity | 9.60% - 12.70% | 11.15% |
| Tax rate | 0.80% - 2.10% | 1.45% |
| Cost of debt | 4.00% - 4.80% | 4.40% |
| WACC | 6.9% - 8.8% | 7.9% |
| Category | Low | High |
| Long-term bond rate | 3.1% | 3.6% |
| Equity market risk premium | 7.4% | 8.4% |
| Adjusted beta | 0.87 | 1.02 |
| Additional risk adjustments | 0.0% | 0.5% |
| Cost of equity | 9.60% | 12.70% |
| Tax rate | 0.80% | 2.10% |
| Debt/Equity ratio | 0.94 | 0.94 |
| Cost of debt | 4.00% | 4.80% |
| After-tax WACC | 6.9% | 8.8% |
| Selected WACC | 7.9% | |
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 LRE.MC:
cost_of_equity (11.15%) = risk_free_rate (3.35%) + equity_risk_premium (7.90%) * adjusted_beta (0.87) + 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.