The WACC of TUI AG (TUI1.DE) is 7.7%.
| Range | Selected | |
| Cost of equity | 8.10% - 12.60% | 10.35% |
| Tax rate | 11.20% - 17.50% | 14.35% |
| Cost of debt | 5.90% - 7.10% | 6.50% |
| WACC | 6.5% - 8.9% | 7.7% |
| Category | Low | High |
| Long-term bond rate | 2.8% | 3.3% |
| Equity market risk premium | 5.1% | 6.1% |
| Adjusted beta | 1.05 | 1.44 |
| Additional risk adjustments | 0.0% | 0.5% |
| Cost of equity | 8.10% | 12.60% |
| Tax rate | 11.20% | 17.50% |
| Debt/Equity ratio | 1.24 | 1.24 |
| Cost of debt | 5.90% | 7.10% |
| After-tax WACC | 6.5% | 8.9% |
| Selected WACC | 7.7% | |
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 TUI1.DE:
cost_of_equity (10.35%) = risk_free_rate (3.05%) + equity_risk_premium (5.60%) * adjusted_beta (1.05) + 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.