The WACC of Saudi Steel Pipe Company SJSC (1320.SR) is 14.7%.
| Range | Selected | |
| Cost of equity | 14.50% - 17.50% | 16.00% |
| Tax rate | 4.70% - 5.80% | 5.25% |
| Cost of debt | 5.00% - 5.00% | 5.00% |
| WACC | 13.3% - 16.0% | 14.7% |
| Category | Low | High |
| Long-term bond rate | 5.9% | 6.4% |
| Equity market risk premium | 6.1% | 7.1% |
| Adjusted beta | 1.4 | 1.49 |
| Additional risk adjustments | 0.0% | 0.5% |
| Cost of equity | 14.50% | 17.50% |
| Tax rate | 4.70% | 5.80% |
| Debt/Equity ratio | 0.13 | 0.13 |
| Cost of debt | 5.00% | 5.00% |
| After-tax WACC | 13.3% | 16.0% |
| Selected WACC | 14.7% | |
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 1320.SR:
cost_of_equity (16.00%) = risk_free_rate (6.15%) + equity_risk_premium (6.60%) * adjusted_beta (1.4) + 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.