The WACC of Maeda Road Construction Co Ltd (1883.T) is 6.2%.
| Range | Selected | |
| Cost of equity | 5.10% - 7.20% | 6.15% |
| Tax rate | 31.10% - 32.40% | 31.75% |
| Cost of debt | 5.00% - 5.00% | 5.00% |
| WACC | 5.1% - 7.2% | 6.2% |
| Category | Low | High |
| Long-term bond rate | 0.8% | 1.2% |
| Equity market risk premium | 5.4% | 6.4% |
| Adjusted beta | 0.81 | 0.84 |
| Additional risk adjustments | 0.0% | 0.5% |
| Cost of equity | 5.10% | 7.20% |
| Tax rate | 31.10% | 32.40% |
| Debt/Equity ratio | 0 | 0 |
| Cost of debt | 5.00% | 5.00% |
| After-tax WACC | 5.1% | 7.2% |
| Selected WACC | 6.2% | |
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 1883.T:
cost_of_equity (6.15%) = risk_free_rate (1.00%) + equity_risk_premium (5.90%) * adjusted_beta (0.81) + 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.