The WACC of Transtema Group AB (TRANS.ST) is 7.8%.
| Range | Selected | |
| Cost of equity | 5.30% - 8.10% | 6.70% |
| Tax rate | 19.20% - 34.10% | 26.65% |
| Cost of debt | 9.90% - 14.30% | 12.10% |
| WACC | 6.7% - 8.8% | 7.8% |
| Category | Low | High |
| Long-term bond rate | 2.5% | 3.0% |
| Equity market risk premium | 5.1% | 6.1% |
| Adjusted beta | 0.54 | 0.76 |
| Additional risk adjustments | 0.0% | 0.5% |
| Cost of equity | 5.30% | 8.10% |
| Tax rate | 19.20% | 34.10% |
| Debt/Equity ratio | 1.16 | 1.16 |
| Cost of debt | 9.90% | 14.30% |
| After-tax WACC | 6.7% | 8.8% |
| Selected WACC | 7.8% | |
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 TRANS.ST:
cost_of_equity (6.70%) = risk_free_rate (2.75%) + equity_risk_premium (5.60%) * adjusted_beta (0.54) + 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.