The WACC of Varta AG (VAR1.DE) is 6.2%.
| Range | Selected | |
| Cost of equity | 5.90% - 12.10% | 9.00% |
| Tax rate | 28.60% - 28.90% | 28.75% |
| Cost of debt | 6.60% - 7.00% | 6.80% |
| WACC | 5.1% - 7.3% | 6.2% |
| Category | Low | High |
| Long-term bond rate | 2.8% | 3.3% |
| Equity market risk premium | 5.1% | 6.1% |
| Adjusted beta | 0.62 | 1.36 |
| Additional risk adjustments | 0.0% | 0.5% |
| Cost of equity | 5.90% | 12.10% |
| Tax rate | 28.60% | 28.90% |
| Debt/Equity ratio | 2.05 | 2.05 |
| Cost of debt | 6.60% | 7.00% |
| After-tax WACC | 5.1% | 7.3% |
| Selected WACC | 6.2% | |
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 VAR1.DE:
cost_of_equity (9.00%) = risk_free_rate (3.05%) + equity_risk_premium (5.60%) * adjusted_beta (0.62) + 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.