The WACC of Testa Residencial SOCIMI SA (YTST.MC) is 10.9%.
| Range | Selected | |
| Cost of equity | 5.40% - 7.10% | 6.25% |
| Tax rate | 0.50% - 0.60% | 0.55% |
| Cost of debt | 4.00% - 20.10% | 12.05% |
| WACC | 4.2% - 17.5% | 10.9% |
| Category | Low | High |
| Long-term bond rate | 3.1% | 3.6% |
| Equity market risk premium | 7.4% | 8.4% |
| Adjusted beta | 0.3 | 0.35 |
| Additional risk adjustments | 0.0% | 0.5% |
| Cost of equity | 5.40% | 7.10% |
| Tax rate | 0.50% | 0.60% |
| Debt/Equity ratio | 4.12 | 4.12 |
| Cost of debt | 4.00% | 20.10% |
| After-tax WACC | 4.2% | 17.5% |
| Selected WACC | 10.9% | |
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 YTST.MC:
cost_of_equity (6.25%) = risk_free_rate (3.35%) + equity_risk_premium (7.90%) * adjusted_beta (0.3) + 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.