The WACC of Korea District Heating Corp (071320.KS) is 5.0%.
| Range | Selected | |
| Cost of equity | 9.50% - 17.00% | 13.25% |
| Tax rate | 23.60% - 26.50% | 25.05% |
| Cost of debt | 4.00% - 6.20% | 5.10% |
| WACC | 3.9% - 6.1% | 5.0% |
| Category | Low | High |
| Long-term bond rate | 3.1% | 3.6% |
| Equity market risk premium | 5.8% | 6.8% |
| Adjusted beta | 1.1 | 1.9 |
| Additional risk adjustments | 0.0% | 0.5% |
| Cost of equity | 9.50% | 17.00% |
| Tax rate | 23.60% | 26.50% |
| Debt/Equity ratio | 7.07 | 7.07 |
| Cost of debt | 4.00% | 6.20% |
| After-tax WACC | 3.9% | 6.1% |
| Selected WACC | 5.0% | |
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 071320.KS:
cost_of_equity (13.25%) = risk_free_rate (3.35%) + equity_risk_premium (6.30%) * adjusted_beta (1.1) + 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.