The WACC of Nexen Corp (005720.KS) is 5.3%.
| Range | Selected | |
| Cost of equity | 9.30% - 14.90% | 12.10% |
| Tax rate | 25.00% - 25.00% | 25.00% |
| Cost of debt | 4.00% - 6.70% | 5.35% |
| WACC | 4.0% - 6.6% | 5.3% |
| Category | Low | High |
| Long-term bond rate | 3.1% | 3.6% |
| Equity market risk premium | 5.8% | 6.8% |
| Adjusted beta | 1.07 | 1.58 |
| Additional risk adjustments | 0.0% | 0.5% |
| Cost of equity | 9.30% | 14.90% |
| Tax rate | 25.00% | 25.00% |
| Debt/Equity ratio | 5.13 | 5.13 |
| Cost of debt | 4.00% | 6.70% |
| After-tax WACC | 4.0% | 6.6% |
| Selected WACC | 5.3% | |
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 005720.KS:
cost_of_equity (12.10%) = risk_free_rate (3.35%) + equity_risk_premium (6.30%) * adjusted_beta (1.07) + 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.