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      In the latest edition of our cost of capital study, ‘The Discount Rate Puzzle: Navigating between Cost of Capital, Alphas and Premiums’, we analyse current developments in the cost of capital and valuation parameters across the DACH region. 

      The focus is on the implications of falling risk premiums against a backdrop of rising interest rates, as well as current issues relating to country risk premiums, size premiums and sector-specific growth assumptions. The focus is on the implications of falling risk premiums against a backdrop of rising interest rates. 

      An overview of the key articles

      • Theses on the current economic environment
      • What lies behind the discount rate puzzle?
      • Deep dive into premiums: How can country risk premiums and size premiums be consistently factored into business valuation?

      Pre-order now: KPMG cost of capital study 2026

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      KPMG cost of capital study 2026

      In our 21st edition, find out how companies can adjust their cost of capital amidst the tension between falling risk premiums and rising interest rates.

      About the cost of capital study

      The KPMG Cost of Capital Study is an annual empirical investigation that provides insights into how current economic developments affect the business models, financial projections and long-term return expectations (cost of capital) of companies in the DACH region. The study’s wide reach each year underlines the significant practical value it offers to companies.

      Topics and trends 2025

      In the 20th edition – of the anniversary edition of our cost of capital study – entitled "Between past and future: Bridging empirical yields with return & growth expectations", we analyse the relationship between historical and implied returns. The focus is on the influence of growth expectations on the implicit market risk premiums, taking into account the implicit return requirements of the markets - in the context of different business models and company developments.

      Europe under pressure:

      Central bank autonomy, debt and AI innovation will characterise the continent's economic development.

      Empirical returns:

      Will regional differences persist in the long term?

      Estimation of implicit returns:

      Are differences due to risk assessments or growth expectations?

      Europe under pressure:

      Central bank autonomy, debt and AI innovation will characterise the continent's economic development.

      Empirical returns:

      Will regional differences persist in the long term?

      Estimation of implicit returns:

      Are differences due to risk assessments or growth expectations?

      • ~300 companies
      • +230 German companies
      • 65% DAX-40-companies
      • 3 Key topics

      Cost of capital study 2025

      Find out how growth expectations and market risk premiums influence the implicit return requirements of the capital markets in the anniversary edition of the Cost of Capital Study 2025.

      Download now
      Glitzer

      Cost of capital parameters 2025

      WACC
      Betafactor
      Total return
      Cost of equity
      Borrowing costs
      Debt ratio
      WACC

      In the current period under review, the participating companies applied a weighted average cost of capital (WACC) ranging from 5.2 per cent to 10.4 per cent. The average WACC across all sectors is 8.5 per cent, which represents a slight increase compared to the previous year (8.2 per cent).

      Comparatively high WACCs were recorded on average in the Industrial Manufacturing (9.4 per cent), Technology (9.4 per cent) and Automotive (9.0 per cent) sectors, while the Energy & Natural Resources (6.3 per cent) and Real Estate (7.0 per cent) sectors had the lowest average WACCs.

      More details in the current Studie.

      Betafactor

      During the survey period, the indebtedness beta factors of the participating companies ranged between 0.72 and 1.33, with an average value of 1.03 (previous year: 1.05).

      The highest average leveraged beta factors were observed in the Automotive (1.25), Industrial Manufacturing (1.15) and Technology (1.07) sectors. Energy & Natural Resources (0.87), Healthcare (0.92) and Media & Telecommunications (0.94) have the lowest average leveraged beta factors in comparison.

      More details in the current Studie.

      Total return

      During the survey period, the risk-free base rate used by the participating companies in Germany and Austria was 2.5 per cent in each case (previous year: 2.6 per cent). In Switzerland, the average base rate used rose to 2.6 per cent (previous year: 1.8 per cent)

      The average market risk premium applied by the participating companies in Germany and Switzerland fell by 0.1 percentage points year-on-year to 6.7 per cent and 6.0 per cent respectively. The market risk premium in Austria has not changed compared to the previous year and remains at 6.7 per cent. 

      This results in an average expected total return in the survey period of 9.2 per cent in Germany and Austria and 8.6 per cent in Switzerland.

      More details in the current Studie.

      Cost of equity

      During the survey period, the participating companies' borrowed capital costs ranged between 7.2 per cent and 12.9 per cent, with an average value across all sectors of 9.7 per cent (previous year: 9.8 per cent).

      At an average of 11.6 per cent, the highest borrowing costs of equity can be observed in the automotive sector. The lowest average debt-equity costs were recorded in the Real Estate sector at 8.2 per cent and the Energy & Natural Resources sector at 8.3 per cent.

      More details in the current Studie.

      Borrowing costs

      The borrowing costs of the participating companies were between 3.4 per cent and 5.5 per cent across all sectors. On average, the borrowing costs applied were 4.3 per cent, which represents a reduction of 0.1 percentage points compared to the previous year.

      The healthcare sector has the highest average borrowing costs at 4.9 per cent, while the energy & natural resources and real estate sectors have the lowest (3.6 per cent each).

      More details in the current Studie.

      Debt ratio

      The debt capital ratios reported by the participating companies vary considerably depending on the sector, which is why the range of debt capital ratios extends from 4.0 per cent to 48.1 per cent. Across all sectors, the average debt ratio is 23.5 per cent (previous year: 28.5 per cent).

      The Energy & Natural Resources sector (37.3 per cent) has the highest average debt ratios in comparison, while the Technology sector (12.3 per cent) has the lowest average debt ratios. The high debt ratio in the Energy & Natural Resources sector can certainly also be explained by the sector's high investment requirements.

      More details in the current Studie.

      Impairment Test

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      ❯

      Around half of the participating companies (48.1 per cent) recognised an impairment - goodwill and/or asset - during the survey period. An asset impairment was recognised significantly more frequently than a goodwill impairment.

      Most impairment losses were recognised by companies in the Consumer Markets sector. In comparison, the fewest impairment losses were recognised by companies in the Healthcare sector.

      In accordance with IFRS, a goodwill impairment test is carried out at least once a year as part of the annual financial statements. In addition, around 42 per cent of participants carried out an impairment test due to a triggering event during the survey period. The triggers for a triggering event are shown in the chart above.

      The underlying causes of the triggering event for an impairment test vary greatly among the participating companies and depend on the respective industry. Across all sectors, companies most frequently cite poorer long-term expectations and other factors as the main reasons for a triggering event.

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