The WACC of Hyundai Rotem Co (064350.KS) is 7.5%.
| Range | Selected | |
| Cost of equity | 6.40% - 8.80% | 7.60% |
| Tax rate | 35.60% - 47.10% | 41.35% |
| Cost of debt | 4.00% - 4.50% | 4.25% |
| WACC | 6.3% - 8.6% | 7.5% |
| Category | Low | High |
| Long-term bond rate | 3.1% | 3.6% |
| Equity market risk premium | 5.8% | 6.8% |
| Adjusted beta | 0.57 | 0.7 |
| Additional risk adjustments | 0.0% | 0.5% |
| Cost of equity | 6.40% | 8.80% |
| Tax rate | 35.60% | 47.10% |
| Debt/Equity ratio | 0.03 | 0.03 |
| Cost of debt | 4.00% | 4.50% |
| After-tax WACC | 6.3% | 8.6% |
| Selected WACC | 7.5% | |
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 064350.KS:
cost_of_equity (7.60%) = risk_free_rate (3.35%) + equity_risk_premium (6.30%) * adjusted_beta (0.57) + 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.