The WACC of KCTC (009070.KS) is 7.4%.
| Range | Selected | |
| Cost of equity | 9.10% - 16.20% | 12.65% |
| Tax rate | 15.90% - 18.60% | 17.25% |
| Cost of debt | 4.80% - 6.70% | 5.75% |
| WACC | 5.7% - 9.1% | 7.4% |
| Category | Low | High |
| Long-term bond rate | 3.1% | 3.6% |
| Equity market risk premium | 5.8% | 6.8% |
| Adjusted beta | 1.04 | 1.77 |
| Additional risk adjustments | 0.0% | 0.5% |
| Cost of equity | 9.10% | 16.20% |
| Tax rate | 15.90% | 18.60% |
| Debt/Equity ratio | 1.95 | 1.95 |
| Cost of debt | 4.80% | 6.70% |
| After-tax WACC | 5.7% | 9.1% |
| Selected WACC | 7.4% | |
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 009070.KS:
cost_of_equity (12.65%) = risk_free_rate (3.35%) + equity_risk_premium (6.30%) * adjusted_beta (1.04) + 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.