The WACC of SHW AG (SW1.DE) is 6.3%.
| Range | Selected | |
| Cost of equity | 5.20% - 8.20% | 6.70% |
| Tax rate | 29.70% - 31.30% | 30.50% |
| Cost of debt | 4.30% - 12.20% | 8.25% |
| WACC | 4.4% - 8.2% | 6.3% |
| Category | Low | High |
| Long-term bond rate | 2.0% | 2.5% |
| Equity market risk premium | 4.7% | 5.7% |
| Adjusted beta | 0.67 | 0.9 |
| Additional risk adjustments | 0.0% | 0.5% |
| Cost of equity | 5.20% | 8.20% |
| Tax rate | 29.70% | 31.30% |
| Debt/Equity ratio | 0.51 | 0.51 |
| Cost of debt | 4.30% | 12.20% |
| After-tax WACC | 4.4% | 8.2% |
| Selected WACC | 6.3% | |
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 SW1.DE:
cost_of_equity (6.70%) = risk_free_rate (2.25%) + equity_risk_premium (5.20%) * adjusted_beta (0.67) + 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.