The WACC of Saipem SpA (SPM.MI) is 8.9%.
| Range | Selected | |
| Cost of equity | 11.60% - 14.30% | 12.95% |
| Tax rate | 28.90% - 40.60% | 34.75% |
| Cost of debt | 4.20% - 4.90% | 4.55% |
| WACC | 8.1% - 9.7% | 8.9% |
| Category | Low | High |
| Long-term bond rate | 3.7% | 4.2% |
| Equity market risk premium | 8.3% | 9.3% |
| Adjusted beta | 0.95 | 1.04 |
| Additional risk adjustments | 0.0% | 0.5% |
| Cost of equity | 11.60% | 14.30% |
| Tax rate | 28.90% | 40.60% |
| Debt/Equity ratio | 0.67 | 0.67 |
| Cost of debt | 4.20% | 4.90% |
| After-tax WACC | 8.1% | 9.7% |
| Selected WACC | 8.9% | |
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 SPM.MI:
cost_of_equity (12.95%) = risk_free_rate (3.95%) + equity_risk_premium (8.80%) * adjusted_beta (0.95) + 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.