The WACC of Lotte Corp (004990.KS) is 7.7%.
| Range | Selected | |
| Cost of equity | 7.70% - 11.70% | 9.70% |
| Tax rate | 26.70% - 42.10% | 34.40% |
| Cost of debt | 4.00% - 20.10% | 12.05% |
| WACC | 3.7% - 11.6% | 7.7% |
| Category | Low | High |
| Long-term bond rate | 3.1% | 3.6% |
| Equity market risk premium | 5.8% | 6.8% |
| Adjusted beta | 0.8 | 1.12 |
| Additional risk adjustments | 0.0% | 0.5% |
| Cost of equity | 7.70% | 11.70% |
| Tax rate | 26.70% | 42.10% |
| Debt/Equity ratio | 5.35 | 5.35 |
| Cost of debt | 4.00% | 20.10% |
| After-tax WACC | 3.7% | 11.6% |
| Selected WACC | 7.7% | |
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 004990.KS:
cost_of_equity (9.70%) = risk_free_rate (3.35%) + equity_risk_premium (6.30%) * adjusted_beta (0.8) + 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.