The WACC of Elica SpA (ELC.MI) is 11.4%.
| Range | Selected | |
| Cost of equity | 10.60% - 14.00% | 12.30% |
| Tax rate | 24.40% - 25.10% | 24.75% |
| Cost of debt | 5.20% - 23.70% | 14.45% |
| WACC | 6.4% - 16.4% | 11.4% |
| Category | Low | High |
| Long-term bond rate | 3.7% | 4.2% |
| Equity market risk premium | 8.3% | 9.3% |
| Adjusted beta | 0.83 | 1.01 |
| Additional risk adjustments | 0.0% | 0.5% |
| Cost of equity | 10.60% | 14.00% |
| Tax rate | 24.40% | 25.10% |
| Debt/Equity ratio | 1.73 | 1.73 |
| Cost of debt | 5.20% | 23.70% |
| After-tax WACC | 6.4% | 16.4% |
| 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 ELC.MI:
cost_of_equity (12.30%) = risk_free_rate (3.95%) + equity_risk_premium (8.80%) * adjusted_beta (0.83) + 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.