The WACC of TomTom NV (TOM2.AS) is 6.2%.
| Range | Selected | |
| Cost of equity | 5.10% - 6.80% | 5.95% |
| Tax rate | 11.20% - 27.50% | 19.35% |
| Cost of debt | 4.30% - 22.60% | 13.45% |
| WACC | 5.0% - 7.4% | 6.2% |
| Category | Low | High |
| Long-term bond rate | 2.6% | 3.1% |
| Equity market risk premium | 5.1% | 6.1% |
| Adjusted beta | 0.39 | 0.45 |
| Additional risk adjustments | 0.5% | 1.0% |
| Cost of equity | 5.10% | 6.80% |
| Tax rate | 11.20% | 27.50% |
| Debt/Equity ratio | 0.07 | 0.07 |
| Cost of debt | 4.30% | 22.60% |
| After-tax WACC | 5.0% | 7.4% |
| Selected WACC | 6.2% | |
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 TOM2.AS:
cost_of_equity (5.95%) = risk_free_rate (2.85%) + equity_risk_premium (5.60%) * adjusted_beta (0.39) + risk_adjustments (0.75%)
We include the risk adjustments, which range from 0% to 1%, to keep our WACC conservatives, especially for companies traded in developing markets.