The WACC of TUI AG (TUI1.DE) is 8.4%.
| Range | Selected | |
| Cost of equity | 10.30% - 14.60% | 12.45% |
| Tax rate | 17.70% - 18.20% | 17.95% |
| Cost of debt | 5.00% - 7.60% | 6.30% |
| WACC | 6.8% - 9.9% | 8.4% |
| Category | Low | High |
| Long-term bond rate | 2.8% | 3.3% |
| Equity market risk premium | 5.1% | 6.1% |
| Adjusted beta | 1.48 | 1.77 |
| Additional risk adjustments | 0.0% | 0.5% |
| Cost of equity | 10.30% | 14.60% |
| Tax rate | 17.70% | 18.20% |
| Debt/Equity ratio | 1.28 | 1.28 |
| Cost of debt | 5.00% | 7.60% |
| After-tax WACC | 6.8% | 9.9% |
| Selected WACC | 8.4% | |
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 TUI1.DE:
cost_of_equity (12.45%) = risk_free_rate (3.05%) + equity_risk_premium (5.60%) * adjusted_beta (1.48) + 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.