The WACC of Farmsco (036580.KS) is 5.3%.
| Range | Selected | |
| Cost of equity | 8.60% - 23.10% | 15.85% |
| Tax rate | 23.40% - 39.90% | 31.65% |
| Cost of debt | 4.30% - 5.60% | 4.95% |
| WACC | 4.1% - 6.4% | 5.3% |
| Category | Low | High |
| Long-term bond rate | 3.1% | 3.6% |
| Equity market risk premium | 5.8% | 6.8% |
| Adjusted beta | 0.95 | 2.79 |
| Additional risk adjustments | 0.0% | 0.5% |
| Cost of equity | 8.60% | 23.10% |
| Tax rate | 23.40% | 39.90% |
| Debt/Equity ratio | 5.48 | 5.48 |
| Cost of debt | 4.30% | 5.60% |
| After-tax WACC | 4.1% | 6.4% |
| 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 036580.KS:
cost_of_equity (15.85%) = risk_free_rate (3.35%) + equity_risk_premium (6.30%) * adjusted_beta (0.95) + 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.