The WACC of Valoe Oyj (VALOE.HE) is 5.1%.
| Range | Selected | |
| Cost of equity | 6.40% - 11.70% | 9.05% |
| Tax rate | 20.00% - 20.00% | 20.00% |
| Cost of debt | 4.00% - 7.00% | 5.50% |
| WACC | 3.7% - 6.5% | 5.1% |
| Category | Low | High |
| Long-term bond rate | 2.7% | 3.2% |
| Equity market risk premium | 5.7% | 6.7% |
| Adjusted beta | 0.65 | 1.2 |
| Additional risk adjustments | 0.0% | 0.5% |
| Cost of equity | 6.40% | 11.70% |
| Tax rate | 20.00% | 20.00% |
| Debt/Equity ratio | 5.83 | 5.83 |
| Cost of debt | 4.00% | 7.00% |
| After-tax WACC | 3.7% | 6.5% |
| Selected WACC | 5.1% | |
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 VALOE.HE:
cost_of_equity (9.05%) = risk_free_rate (2.95%) + equity_risk_premium (6.20%) * adjusted_beta (0.65) + 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.