The WACC of LumenRadio AB (LUMEN.ST) is 5.0%.
| Range | Selected | |
| Cost of equity | 4.40% - 5.70% | 5.05% |
| Tax rate | 17.30% - 20.10% | 18.70% |
| Cost of debt | 4.00% - 4.50% | 4.25% |
| WACC | 4.3% - 5.7% | 5.0% |
| Category | Low | High |
| Long-term bond rate | 2.5% | 3.0% |
| Equity market risk premium | 5.1% | 6.1% |
| Adjusted beta | 0.36 | 0.36 |
| Additional risk adjustments | 0.0% | 0.5% |
| Cost of equity | 4.40% | 5.70% |
| Tax rate | 17.30% | 20.10% |
| Debt/Equity ratio | 0.01 | 0.01 |
| Cost of debt | 4.00% | 4.50% |
| After-tax WACC | 4.3% | 5.7% |
| Selected WACC | 5.0% | |
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 LUMEN.ST:
cost_of_equity (5.05%) = risk_free_rate (2.75%) + equity_risk_premium (5.60%) * adjusted_beta (0.36) + 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.