The WACC of Safran SA (SAF.PA) is 8.6%.
Range | Selected | |
Cost of equity | 7.7% - 10.0% | 8.85% |
Tax rate | 29.8% - 32.6% | 31.2% |
Cost of debt | 5.0% - 5.0% | 5% |
WACC | 7.5% - 9.7% | 8.6% |
Category | Low | High |
Long-term bond rate | 3.0% | 3.5% |
Equity market risk premium | 5.8% | 6.8% |
Adjusted beta | 0.81 | 0.88 |
Additional risk adjustments | 0.0% | 0.5% |
Cost of equity | 7.7% | 10.0% |
Tax rate | 29.8% | 32.6% |
Debt/Equity ratio | 0.04 | 0.04 |
Cost of debt | 5.0% | 5.0% |
After-tax WACC | 7.5% | 9.7% |
Selected WACC | 8.6% | |
Debt/Equity | Unlevered | |||
Peers | Company Name | ratio | Beta | beta |
SAF.PA | Safran SA | 0.04 | 1.17 | 1.14 |
AM.PA | Dassault Aviation SA | 0.01 | 0.62 | 0.61 |
ASELS.IS | Aselsan Elektronik Sanayi ve Ticaret AS | 0.11 | 0.77 | 0.71 |
BA.L | BAE Systems PLC | 0.19 | 0.62 | 0.55 |
HO.PA | Thales SA | 0.15 | 0.36 | 0.33 |
KOG.OL | Kongsberg Gruppen ASA | 0.02 | 1.13 | 1.12 |
LDO.MI | Leonardo SpA | 0.17 | 0.75 | 0.68 |
MTX.DE | MTU Aero Engines AG | 0.14 | 0.97 | 0.89 |
RR.L | Rolls-Royce Holdings PLC | 0.06 | 1.41 | 1.35 |
SAAB B.ST | Saab AB | 0.03 | 0.75 | 0.73 |
Low | High | |
Unlevered beta | 0.7 | 0.8 |
Relevered beta | 0.72 | 0.82 |
Adjusted relevered beta | 0.81 | 0.88 |
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 SAF.PA:
cost_of_equity (8.85%) = risk_free_rate (3.25%) + equity_risk_premium (6.30%) * adjusted_beta (0.81) + 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.