TYRES.HE WACC - Weighted Average Cost of Capital

The WACC of Nokian Tyres plc (TYRES.HE) is 7.1%.

The Cost of Equity of Nokian Tyres plc (TYRES.HE) is 8.25%.

The Cost of Debt of Nokian Tyres plc (TYRES.HE) is 5.85%.

	Range	Selected
Cost of equity	7.10% - 9.40%	8.25%
Tax rate	16.90% - 23.10%	20.00%
Cost of debt	5.40% - 6.30%	5.85%
WACC	6.2% - 8.0%	7.1%

WACC

TYRES.HE WACC calculation

Category	Low	High

Long-term bond rate	2.7%	3.2%
Equity market risk premium	5.7%	6.7%
Adjusted beta	0.76	0.85

Additional risk adjustments	0.0%	0.5%
Cost of equity	7.10%	9.40%

Tax rate	16.90%	23.10%
Debt/Equity ratio	0.47	0.47
Cost of debt	5.40%	6.30%

After-tax WACC	6.2%	8.0%


Selected WACC	7.1%

TYRES.HE's CAPM model and how its cost of Equity is calculated

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 TYRES.HE:

cost_of_equity (8.25%) = risk_free_rate (2.95%) + equity_risk_premium (6.20%) * adjusted_beta (0.76) + 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.