How would WACC differ if you were valuing a company in Brazil vs the US?

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IBPrep · Accepted Answer

Three adjustments: (1) Risk-free rate, Brazilian government debt is not considered fully risk-free; common approach is to use the US Treasury yield + a 'country risk premium' (CRP, currently ~3-5% for Brazil); (2) Equity risk premium, use a higher ERP that incorporates emerging-market risk (often 7-10% vs ~5-6% US baseline); (3) Cost of debt, use the actual market yield on Brazilian-issued corporate debt, which already embeds country risk + credit risk + currency considerations; (4) Tax rate, use Brazil's corporate tax rate (~34%) for the after-tax cost of debt and Hamada relevering of beta.

How would WACC differ if you were valuing a company in Brazil vs the US?

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