LREN3.SA WACC - Weighted Average Cost of Capital

The WACC of Lojas Renner SA (LREN3.SA) is 16.8%.

The Cost of Equity of Lojas Renner SA (LREN3.SA) is 18.45%.

The Cost of Debt of Lojas Renner SA (LREN3.SA) is 8.70%.

	Range	Selected
Cost of equity	16.90% - 20.00%	18.45%
Tax rate	8.30% - 11.60%	9.95%
Cost of debt	4.90% - 12.50%	8.70%
WACC	14.9% - 18.6%	16.8%

WACC

LREN3.SA WACC calculation

Category	Low	High

Long-term bond rate	11.9%	12.4%
Equity market risk premium	9.5%	10.5%
Adjusted beta	0.53	0.68

Additional risk adjustments	0.0%	0.5%
Cost of equity	16.90%	20.00%

Tax rate	8.30%	11.60%
Debt/Equity ratio	0.19	0.19
Cost of debt	4.90%	12.50%

After-tax WACC	14.9%	18.6%


Selected WACC	16.8%

LREN3.SA's CAPM model and how its cost of Equity is calculated

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 LREN3.SA:

cost_of_equity (18.45%) = risk_free_rate (12.15%) + equity_risk_premium (10.00%) * adjusted_beta (0.53) + 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.