The WACC of H Lundbeck A/S (LUN.CO) is 5.3%.
| Range | Selected | |
| Cost of equity | 4.50% - 6.90% | 5.70% |
| Tax rate | 25.10% - 31.10% | 28.10% |
| Cost of debt | 5.00% - 5.00% | 5.00% |
| WACC | 4.4% - 6.3% | 5.3% |
| Category | Low | High |
| Long-term bond rate | 0.4% | 0.9% |
| Equity market risk premium | 5.2% | 6.2% |
| Adjusted beta | 0.78 | 0.88 |
| Additional risk adjustments | 0.0% | 0.5% |
| Cost of equity | 4.50% | 6.90% |
| Tax rate | 25.10% | 31.10% |
| Debt/Equity ratio | 0.2 | 0.2 |
| Cost of debt | 5.00% | 5.00% |
| After-tax WACC | 4.4% | 6.3% |
| Selected WACC | 5.3% | |
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 LUN.CO:
cost_of_equity (5.70%) = risk_free_rate (0.65%) + equity_risk_premium (5.70%) * adjusted_beta (0.78) + 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.