The WACC of Sesa SpA (SES.MI) is 8.8%.
| Range | Selected | |
| Cost of equity | 8.60% - 12.60% | 10.60% |
| Tax rate | 29.70% - 29.80% | 29.75% |
| Cost of debt | 4.40% - 5.10% | 4.75% |
| WACC | 7.2% - 10.4% | 8.8% |
| Category | Low | High |
| Long-term bond rate | 3.7% | 4.2% |
| Equity market risk premium | 8.3% | 9.3% |
| Adjusted beta | 0.59 | 0.86 |
| Additional risk adjustments | 0.0% | 0.5% |
| Cost of equity | 8.60% | 12.60% |
| Tax rate | 29.70% | 29.80% |
| Debt/Equity ratio | 0.32 | 0.32 |
| Cost of debt | 4.40% | 5.10% |
| After-tax WACC | 7.2% | 10.4% |
| Selected WACC | 8.8% | |
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 SES.MI:
cost_of_equity (10.60%) = risk_free_rate (3.95%) + equity_risk_premium (8.80%) * adjusted_beta (0.59) + 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.