The WACC of Itau Unibanco Holding SA (ITUB4.SA) is 9.5%.
| Range | Selected | |
| Cost of equity | 19.70% - 23.90% | 21.80% |
| Tax rate | 16.40% - 23.70% | 20.05% |
| Cost of debt | 5.00% - 5.00% | 5.00% |
| WACC | 9.0% - 10.0% | 9.5% |
| Category | Low | High |
| Long-term bond rate | 11.9% | 12.4% |
| Equity market risk premium | 9.5% | 10.5% |
| Adjusted beta | 0.82 | 1.05 |
| Additional risk adjustments | 0.0% | 0.5% |
| Cost of equity | 19.70% | 23.90% |
| Tax rate | 16.40% | 23.70% |
| Debt/Equity ratio | 2.24 | 2.24 |
| Cost of debt | 5.00% | 5.00% |
| After-tax WACC | 9.0% | 10.0% |
| Selected WACC | 9.5% | |
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 ITUB4.SA:
cost_of_equity (21.80%) = risk_free_rate (12.15%) + equity_risk_premium (10.00%) * adjusted_beta (0.82) + 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.