The WACC of TXT e solutions SpA (TXT.MI) is 8.4%.
| Range | Selected | |
| Cost of equity | 8.40% - 11.50% | 9.95% |
| Tax rate | 25.20% - 26.10% | 25.65% |
| Cost of debt | 4.00% - 7.00% | 5.50% |
| WACC | 7.0% - 9.8% | 8.4% |
| Category | Low | High |
| Long-term bond rate | 3.7% | 4.2% |
| Equity market risk premium | 8.3% | 9.3% |
| Adjusted beta | 0.57 | 0.73 |
| Additional risk adjustments | 0.0% | 0.5% |
| Cost of equity | 8.40% | 11.50% |
| Tax rate | 25.20% | 26.10% |
| Debt/Equity ratio | 0.35 | 0.35 |
| Cost of debt | 4.00% | 7.00% |
| After-tax WACC | 7.0% | 9.8% |
| Selected WACC | 8.4% | |
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 TXT.MI:
cost_of_equity (9.95%) = risk_free_rate (3.95%) + equity_risk_premium (8.80%) * adjusted_beta (0.57) + 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.