The WACC of Strongpoint ASA (STRO.OL) is 8.5%.
| Range | Selected | |
| Cost of equity | 5.40% - 7.80% | 6.60% |
| Tax rate | 24.20% - 27.40% | 25.80% |
| Cost of debt | 20.30% - 23.30% | 21.80% |
| WACC | 7.5% - 9.6% | 8.5% |
| Category | Low | High |
| Long-term bond rate | 3.3% | 3.8% |
| Equity market risk premium | 5.1% | 6.1% |
| Adjusted beta | 0.41 | 0.56 |
| Additional risk adjustments | 0.0% | 0.5% |
| Cost of equity | 5.40% | 7.80% |
| Tax rate | 24.20% | 27.40% |
| Debt/Equity ratio | 0.26 | 0.26 |
| Cost of debt | 20.30% | 23.30% |
| After-tax WACC | 7.5% | 9.6% |
| Selected WACC | 8.5% | |
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 STRO.OL:
cost_of_equity (6.60%) = risk_free_rate (3.55%) + equity_risk_premium (5.60%) * adjusted_beta (0.41) + 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.