The WACC of Ocean Yield ASA (OCY.OL) is 7.6%.
| Range | Selected | |
| Cost of equity | 9.50% - 15.60% | 12.55% |
| Tax rate | 8.10% - 11.40% | 9.75% |
| Cost of debt | 4.50% - 7.10% | 5.80% |
| WACC | 5.9% - 9.3% | 7.6% |
| Category | Low | High |
| Long-term bond rate | 3.1% | 3.6% |
| Equity market risk premium | 4.7% | 5.7% |
| Adjusted beta | 1.36 | 2.01 |
| Additional risk adjustments | 0.0% | 0.5% |
| Cost of equity | 9.50% | 15.60% |
| Tax rate | 8.10% | 11.40% |
| Debt/Equity ratio | 2.17 | 2.17 |
| Cost of debt | 4.50% | 7.10% |
| After-tax WACC | 5.9% | 9.3% |
| Selected WACC | 7.6% | |
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 OCY.OL:
cost_of_equity (12.55%) = risk_free_rate (3.35%) + equity_risk_premium (5.20%) * adjusted_beta (1.36) + 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.