The WACC of Ferrari NV (RACE.MI) is 9.0%.
| Range | Selected | |
| Cost of equity | 7.50% - 11.00% | 9.25% |
| Tax rate | 19.70% - 20.10% | 19.90% |
| Cost of debt | 4.00% - 4.50% | 4.25% |
| WACC | 7.3% - 10.7% | 9.0% |
| Category | Low | High |
| Long-term bond rate | 3.7% | 4.2% |
| Equity market risk premium | 8.3% | 9.3% |
| Adjusted beta | 0.46 | 0.68 |
| Additional risk adjustments | 0.0% | 0.5% |
| Cost of equity | 7.50% | 11.00% |
| Tax rate | 19.70% | 20.10% |
| Debt/Equity ratio | 0.04 | 0.04 |
| Cost of debt | 4.00% | 4.50% |
| After-tax WACC | 7.3% | 10.7% |
| Selected WACC | 9.0% | |
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 RACE.MI:
cost_of_equity (9.25%) = risk_free_rate (3.95%) + equity_risk_premium (8.80%) * adjusted_beta (0.46) + 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.