The WACC of Sonae SGPS SA (SON.LS) is 6.5%.
| Range | Selected | |
| Cost of equity | 7.30% - 11.00% | 9.15% |
| Tax rate | 3.30% - 5.70% | 4.50% |
| Cost of debt | 5.00% - 5.00% | 5.00% |
| WACC | 5.8% - 7.1% | 6.5% |
| Category | Low | High |
| Long-term bond rate | 2.9% | 3.4% |
| Equity market risk premium | 6.9% | 7.8% |
| Adjusted beta | 0.65 | 0.9 |
| Additional risk adjustments | 0.0% | 0.5% |
| Cost of equity | 7.30% | 11.00% |
| Tax rate | 3.30% | 5.70% |
| Debt/Equity ratio | 1.57 | 1.57 |
| Cost of debt | 5.00% | 5.00% |
| After-tax WACC | 5.8% | 7.1% |
| Selected WACC | 6.5% | |
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 SON.LS:
cost_of_equity (9.15%) = risk_free_rate (3.15%) + equity_risk_premium (7.35%) * adjusted_beta (0.65) + 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.