The WACC of CJ CheilJedang Corp (097950.KS) is 7.1%.
| Range | Selected | |
| Cost of equity | 5.60% - 7.70% | 6.65% |
| Tax rate | 32.00% - 43.70% | 37.85% |
| Cost of debt | 4.50% - 20.10% | 12.30% |
| WACC | 3.6% - 10.5% | 7.1% |
| Category | Low | High |
| Long-term bond rate | 3.1% | 3.6% |
| Equity market risk premium | 5.8% | 6.8% |
| Adjusted beta | 0.43 | 0.53 |
| Additional risk adjustments | 0.0% | 0.5% |
| Cost of equity | 5.60% | 7.70% |
| Tax rate | 32.00% | 43.70% |
| Debt/Equity ratio | 3.52 | 3.52 |
| Cost of debt | 4.50% | 20.10% |
| After-tax WACC | 3.6% | 10.5% |
| Selected WACC | 7.1% | |
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 (6.65%) = risk_free_rate (3.35%) + equity_risk_premium (6.30%) * adjusted_beta (0.43) + 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.