The WACC of Wavestone SA (WAVE.PA) is 7.5%.
| Range | Selected | |
| Cost of equity | 6.50% - 9.00% | 7.75% |
| Tax rate | 27.50% - 28.40% | 27.95% |
| Cost of debt | 4.00% - 4.50% | 4.25% |
| WACC | 6.3% - 8.6% | 7.5% |
| Category | Low | High |
| Long-term bond rate | 3.0% | 3.5% |
| Equity market risk premium | 5.8% | 6.8% |
| Adjusted beta | 0.61 | 0.73 |
| Additional risk adjustments | 0.0% | 0.5% |
| Cost of equity | 6.50% | 9.00% |
| Tax rate | 27.50% | 28.40% |
| Debt/Equity ratio | 0.07 | 0.07 |
| Cost of debt | 4.00% | 4.50% |
| After-tax WACC | 6.3% | 8.6% |
| Selected WACC | 7.5% | |
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 WAVE.PA:
cost_of_equity (7.75%) = risk_free_rate (3.25%) + equity_risk_premium (6.30%) * adjusted_beta (0.61) + 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.