The WACC of Tubacex SA (TUB.MC) is 7.6%.
| Range | Selected | |
| Cost of equity | 8.30% - 12.70% | 10.50% |
| Tax rate | 11.50% - 13.90% | 12.70% |
| Cost of debt | 5.20% - 6.20% | 5.70% |
| WACC | 6.4% - 8.8% | 7.6% |
| Category | Low | High |
| Long-term bond rate | 3.1% | 3.6% |
| Equity market risk premium | 7.4% | 8.4% |
| Adjusted beta | 0.71 | 1.01 |
| Additional risk adjustments | 0.0% | 0.5% |
| Cost of equity | 8.30% | 12.70% |
| Tax rate | 11.50% | 13.90% |
| Debt/Equity ratio | 1.11 | 1.11 |
| Cost of debt | 5.20% | 6.20% |
| After-tax WACC | 6.4% | 8.8% |
| Selected WACC | 7.6% | |
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 TUB.MC:
cost_of_equity (10.50%) = risk_free_rate (3.35%) + equity_risk_premium (7.90%) * adjusted_beta (0.71) + 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.