The WACC of Renault SA (RNO.PA) is 5.3%.
| Range | Selected | |
| Cost of equity | 11.50% - 21.90% | 16.70% |
| Tax rate | 22.20% - 31.70% | 26.95% |
| Cost of debt | 4.00% - 4.50% | 4.25% |
| WACC | 4.4% - 6.1% | 5.3% |
| Category | Low | High |
| Long-term bond rate | 3.0% | 3.5% |
| Equity market risk premium | 5.8% | 6.8% |
| Adjusted beta | 1.47 | 2.63 |
| Additional risk adjustments | 0.0% | 0.5% |
| Cost of equity | 11.50% | 21.90% |
| Tax rate | 22.20% | 31.70% |
| Debt/Equity ratio | 5.29 | 5.29 |
| Cost of debt | 4.00% | 4.50% |
| After-tax WACC | 4.4% | 6.1% |
| Selected WACC | 5.3% | |
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 RNO.PA:
cost_of_equity (16.70%) = risk_free_rate (3.25%) + equity_risk_premium (6.30%) * adjusted_beta (1.47) + 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.