The WACC of Islamic Arab Insurance Co PSC (SALAMA.DB) is 9.1%.
| Range | Selected | |
| Cost of equity | 7.70% - 10.60% | 9.15% |
| Tax rate | 14.60% - 17.70% | 16.15% |
| Cost of debt | 5.00% - 5.00% | 5.00% |
| WACC | 7.7% - 10.5% | 9.1% |
| Category | Low | High |
| Long-term bond rate | 5.9% | 6.4% |
| Equity market risk premium | 5.8% | 6.8% |
| Adjusted beta | 0.31 | 0.55 |
| Additional risk adjustments | 0.0% | 0.5% |
| Cost of equity | 7.70% | 10.60% |
| Tax rate | 14.60% | 17.70% |
| Debt/Equity ratio | 0.02 | 0.02 |
| Cost of debt | 5.00% | 5.00% |
| After-tax WACC | 7.7% | 10.5% |
| Selected WACC | 9.1% | |
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 SALAMA.DB:
cost_of_equity (9.15%) = risk_free_rate (6.15%) + equity_risk_premium (6.30%) * adjusted_beta (0.31) + 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.