The WACC of Magnolia Bostad AB (MAG.ST) is 5.7%.
| Range | Selected | |
| Cost of equity | 4.80% - 7.90% | 6.35% |
| Tax rate | 3.10% - 10.70% | 6.90% |
| Cost of debt | 5.00% - 5.00% | 5.00% |
| WACC | 4.8% - 6.5% | 5.7% |
| Category | Low | High |
| Long-term bond rate | 0.6% | 1.1% |
| Equity market risk premium | 5.2% | 6.2% |
| Adjusted beta | 0.7 | 0.93 |
| Additional risk adjustments | 0.5% | 1.0% |
| Cost of equity | 4.80% | 7.90% |
| Tax rate | 3.10% | 10.70% |
| Debt/Equity ratio | 0.7 | 0.7 |
| Cost of debt | 5.00% | 5.00% |
| After-tax WACC | 4.8% | 6.5% |
| Selected WACC | 5.7% | |
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 MAG.ST:
cost_of_equity (6.35%) = risk_free_rate (0.85%) + equity_risk_premium (5.70%) * adjusted_beta (0.7) + risk_adjustments (0.75%)
We include the risk adjustments, which range from 0% to 1%, to keep our WACC conservatives, especially for companies traded in developing markets.