The WACC of Formosa Oilseed Processing Co Ltd (1225.TW) is 4.8%.
| Range | Selected | |
| Cost of equity | 4.70% - 6.50% | 5.60% |
| Tax rate | 18.10% - 19.00% | 18.55% |
| Cost of debt | 4.00% - 4.50% | 4.25% |
| WACC | 4.2% - 5.4% | 4.8% |
| Category | Low | High |
| Long-term bond rate | 2.0% | 2.5% |
| Equity market risk premium | 6.0% | 7.0% |
| Adjusted beta | 0.45 | 0.49 |
| Additional risk adjustments | 0.0% | 0.5% |
| Cost of equity | 4.70% | 6.50% |
| Tax rate | 18.10% | 19.00% |
| Debt/Equity ratio | 0.61 | 0.61 |
| Cost of debt | 4.00% | 4.50% |
| After-tax WACC | 4.2% | 5.4% |
| Selected WACC | 4.8% | |
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 1225.TW:
cost_of_equity (5.60%) = risk_free_rate (2.25%) + equity_risk_premium (6.50%) * adjusted_beta (0.45) + 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.