The WACC of Banco Santander Brasil SA (SANB4.SA) is 9.1%.
| Range | Selected | |
| Cost of equity | 18.50% - 21.50% | 20.00% |
| Tax rate | 26.20% - 30.90% | 28.55% |
| Cost of debt | 5.00% - 5.00% | 5.00% |
| WACC | 8.6% - 9.5% | 9.1% |
| Category | Low | High |
| Long-term bond rate | 10.6% | 11.1% |
| Equity market risk premium | 9.5% | 10.5% |
| Adjusted beta | 0.83 | 0.95 |
| Additional risk adjustments | 0.0% | 0.5% |
| Cost of equity | 18.50% | 21.50% |
| Tax rate | 26.20% | 30.90% |
| Debt/Equity ratio | 1.98 | 1.98 |
| Cost of debt | 5.00% | 5.00% |
| After-tax WACC | 8.6% | 9.5% |
| 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 SANB4.SA:
cost_of_equity (20.00%) = risk_free_rate (10.85%) + equity_risk_premium (10.00%) * adjusted_beta (0.83) + 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.