The WACC of Vatryggingafelag Islands hf (VIS.IC) is 11.4%.
| Range | Selected | |
| Cost of equity | 11.20% - 13.40% | 12.30% |
| Tax rate | 11.10% - 11.90% | 11.50% |
| Cost of debt | 5.00% - 5.00% | 5.00% |
| WACC | 10.4% - 12.4% | 11.4% |
| Category | Low | High |
| Long-term bond rate | 6.8% | 7.3% |
| Equity market risk premium | 6.3% | 7.3% |
| Adjusted beta | 0.69 | 0.77 |
| Additional risk adjustments | 0.0% | 0.5% |
| Cost of equity | 11.20% | 13.40% |
| Tax rate | 11.10% | 11.90% |
| Debt/Equity ratio | 0.13 | 0.13 |
| Cost of debt | 5.00% | 5.00% |
| After-tax WACC | 10.4% | 12.4% |
| Selected WACC | 11.4% | |
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 VIS.IC:
cost_of_equity (12.30%) = risk_free_rate (7.05%) + equity_risk_premium (6.80%) * adjusted_beta (0.69) + 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.