The WACC of Renergetica SpA (REN.MI) is 8.1%.
| Range | Selected | |
| Cost of equity | 7.90% - 10.20% | 9.05% |
| Tax rate | 13.30% - 16.60% | 14.95% |
| Cost of debt | 5.00% - 5.00% | 5.00% |
| WACC | 7.2% - 9.1% | 8.1% |
| Category | Low | High |
| Long-term bond rate | 4.3% | 4.8% |
| Equity market risk premium | 8.8% | 9.8% |
| Adjusted beta | 0.4 | 0.5 |
| Additional risk adjustments | 0.0% | 0.5% |
| Cost of equity | 7.90% | 10.20% |
| Tax rate | 13.30% | 16.60% |
| Debt/Equity ratio | 0.24 | 0.24 |
| Cost of debt | 5.00% | 5.00% |
| After-tax WACC | 7.2% | 9.1% |
| Selected WACC | 8.1% | |
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 REN.MI:
cost_of_equity (9.05%) = risk_free_rate (4.55%) + equity_risk_premium (9.30%) * adjusted_beta (0.4) + 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.