The WACC of Roundtop Machinery Industries Co Ltd (1540.TW) is 8.1%.
| Range | Selected | |
| Cost of equity | 10.10% - 14.40% | 12.25% |
| Tax rate | 20.80% - 22.00% | 21.40% |
| Cost of debt | 5.00% - 5.00% | 5.00% |
| WACC | 7.0% - 9.2% | 8.1% |
| Category | Low | High |
| Long-term bond rate | 2.0% | 2.5% |
| Equity market risk premium | 6.0% | 7.0% |
| Adjusted beta | 1.34 | 1.63 |
| Additional risk adjustments | 0.0% | 0.5% |
| Cost of equity | 10.10% | 14.40% |
| Tax rate | 20.80% | 22.00% |
| Debt/Equity ratio | 1 | 1 |
| Cost of debt | 5.00% | 5.00% |
| After-tax WACC | 7.0% | 9.2% |
| Selected WACC | 8.1% | |
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 1540.TW:
cost_of_equity (12.25%) = risk_free_rate (2.25%) + equity_risk_premium (6.50%) * adjusted_beta (1.34) + 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.