The WACC of CJ CheilJedang Corp (097950.KS) is 5.8%.
| Range | Selected | |
| Cost of equity | 8.40% - 12.70% | 10.55% |
| Tax rate | 30.60% - 34.20% | 32.40% |
| Cost of debt | 4.00% - 8.30% | 6.15% |
| WACC | 4.3% - 7.4% | 5.8% |
| Category | Low | High |
| Long-term bond rate | 3.1% | 3.6% |
| Equity market risk premium | 5.8% | 6.8% |
| Adjusted beta | 0.92 | 1.27 |
| Additional risk adjustments | 0.0% | 0.5% |
| Cost of equity | 8.40% | 12.70% |
| Tax rate | 30.60% | 34.20% |
| Debt/Equity ratio | 2.79 | 2.79 |
| Cost of debt | 4.00% | 8.30% |
| After-tax WACC | 4.3% | 7.4% |
| Selected WACC | 5.8% | |
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 097950.KS:
cost_of_equity (10.55%) = risk_free_rate (3.35%) + equity_risk_premium (6.30%) * adjusted_beta (0.92) + 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.