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Cost of Equity Estimation Inputs

Based on the results of our internal research we present the inputs for cost of equity calculation.

Equity Risk Premium updated as of 29th February 2024

8.4 %  for medium companies (market capitalisation below EUR 1 223 million)

Equity Risk Premium - Medium Companies


5.9 %  for large companies (market capitalisation from EUR 1 223 million)                   

Equity Risk Premium - Large Companies

The equity risk premium is estimated based on the current stock prices and expected dividends or free cash flows of stocks as an implied equity risk premium. The estimate is based on the publicly traded companies residing in European countries with the credit rating between Aa1 to Baa3 and is calculated as a 3-month average.

In order to arrive at the cost of equity, the equity risk premium shall be accompanied by an appropriate risk-free rate and an appropriate beta coefficient.

The calculation of the cost of equity is based on the commonly used Capital Asset Pricing Model (CAPM):

CoE = rf + 𝛽 × ERP

where rf is the risk-free rate (yield of the local sovereign bonds with 10Y tenor),

𝛽 is the beta coefficient, and

ERP is the equity risk premium.

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