The WACC of Hong Tai Electric Industrial Co Ltd (1612.TW) is 8.6%.
| Range | Selected | |
| Cost of equity | 7.10% - 10.10% | 8.60% |
| Tax rate | 15.20% - 18.30% | 16.75% |
| Cost of debt | 4.00% - 37.70% | 20.85% |
| WACC | 7.1% - 10.2% | 8.6% |
| Category | Low | High |
| Long-term bond rate | 2.0% | 2.5% |
| Equity market risk premium | 6.0% | 7.0% |
| Adjusted beta | 0.85 | 1.02 |
| Additional risk adjustments | 0.0% | 0.5% |
| Cost of equity | 7.10% | 10.10% |
| Tax rate | 15.20% | 18.30% |
| Debt/Equity ratio | 0 | 0 |
| Cost of debt | 4.00% | 37.70% |
| After-tax WACC | 7.1% | 10.2% |
| Selected WACC | 8.6% | |
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 1612.TW:
cost_of_equity (8.60%) = risk_free_rate (2.25%) + equity_risk_premium (6.50%) * adjusted_beta (0.85) + 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.