The WACC of SMA Solar Technology AG (S92.DE) is 9.8%.
| Range | Selected | |
| Cost of equity | 8.60% - 12.90% | 10.75% |
| Tax rate | 16.10% - 22.60% | 19.35% |
| Cost of debt | 7.00% - 7.40% | 7.20% |
| WACC | 8.0% - 11.5% | 9.8% |
| Category | Low | High |
| Long-term bond rate | 2.8% | 3.3% |
| Equity market risk premium | 5.1% | 6.1% |
| Adjusted beta | 1.14 | 1.5 |
| Additional risk adjustments | 0.0% | 0.5% |
| Cost of equity | 8.60% | 12.90% |
| Tax rate | 16.10% | 22.60% |
| Debt/Equity ratio | 0.25 | 0.25 |
| Cost of debt | 7.00% | 7.40% |
| After-tax WACC | 8.0% | 11.5% |
| Selected WACC | 9.8% | |
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 S92.DE:
cost_of_equity (10.75%) = risk_free_rate (3.05%) + equity_risk_premium (5.60%) * adjusted_beta (1.14) + 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.