The WACC of OVS SpA (OVS.MI) is 8.3%.
| Range | Selected | |
| Cost of equity | 12.30% - 16.10% | 14.20% |
| Tax rate | 31.70% - 33.20% | 32.45% |
| Cost of debt | 5.00% - 5.00% | 5.00% |
| WACC | 7.4% - 9.1% | 8.3% |
| Category | Low | High |
| Long-term bond rate | 3.7% | 4.2% |
| Equity market risk premium | 8.3% | 9.3% |
| Adjusted beta | 1.04 | 1.22 |
| Additional risk adjustments | 0.0% | 0.5% |
| Cost of equity | 12.30% | 16.10% |
| Tax rate | 31.70% | 33.20% |
| Debt/Equity ratio | 1.2 | 1.2 |
| Cost of debt | 5.00% | 5.00% |
| After-tax WACC | 7.4% | 9.1% |
| Selected WACC | 8.3% | |
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 OVS.MI:
cost_of_equity (14.20%) = risk_free_rate (3.95%) + equity_risk_premium (8.80%) * adjusted_beta (1.04) + 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.