The WACC of Banco de Sabadell SA (SAB.MC) is 6.8%.
| Range | Selected | |
| Cost of equity | 12.20% - 17.00% | 14.60% |
| Tax rate | 28.50% - 29.40% | 28.95% |
| Cost of debt | 5.00% - 5.00% | 5.00% |
| WACC | 6.1% - 7.5% | 6.8% |
| Category | Low | High |
| Long-term bond rate | 3.1% | 3.6% |
| Equity market risk premium | 7.4% | 8.4% |
| Adjusted beta | 1.23 | 1.52 |
| Additional risk adjustments | 0.0% | 0.5% |
| Cost of equity | 12.20% | 17.00% |
| Tax rate | 28.50% | 29.40% |
| Debt/Equity ratio | 2.42 | 2.42 |
| Cost of debt | 5.00% | 5.00% |
| After-tax WACC | 6.1% | 7.5% |
| Selected WACC | 6.8% | |
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 SAB.MC:
cost_of_equity (14.60%) = risk_free_rate (3.35%) + equity_risk_premium (7.90%) * adjusted_beta (1.23) + 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.