The WACC of Risanamento SpA (RN.MI) is 7.0%.
| Range | Selected | |
| Cost of equity | 6.30% - 7.80% | 7.05% |
| Tax rate | 1.50% - 4.80% | 3.15% |
| Cost of debt | 7.00% - 7.30% | 7.15% |
| WACC | 6.3% - 7.7% | 7.0% |
| Category | Low | High |
| Long-term bond rate | 3.7% | 4.2% |
| Equity market risk premium | 8.3% | 9.3% |
| Adjusted beta | 0.32 | 0.34 |
| Additional risk adjustments | 0.0% | 0.5% |
| Cost of equity | 6.30% | 7.80% |
| Tax rate | 1.50% | 4.80% |
| Debt/Equity ratio | 0.07 | 0.07 |
| Cost of debt | 7.00% | 7.30% |
| After-tax WACC | 6.3% | 7.7% |
| Selected WACC | 7.0% | |
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 RN.MI:
cost_of_equity (7.05%) = risk_free_rate (3.95%) + equity_risk_premium (8.80%) * adjusted_beta (0.32) + 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.