The WACC of Cheng Loong Corp (1904.TW) is 4.9%.
| Range | Selected | |
| Cost of equity | 4.80% - 7.60% | 6.20% |
| Tax rate | 24.80% - 29.10% | 26.95% |
| Cost of debt | 4.00% - 7.00% | 5.50% |
| WACC | 3.8% - 6.1% | 4.9% |
| Category | Low | High |
| Long-term bond rate | 2.0% | 2.5% |
| Equity market risk premium | 6.0% | 7.0% |
| Adjusted beta | 0.37 | 0.59 |
| Additional risk adjustments | 0.5% | 1.0% |
| Cost of equity | 4.80% | 7.60% |
| Tax rate | 24.80% | 29.10% |
| Debt/Equity ratio | 1.37 | 1.37 |
| Cost of debt | 4.00% | 7.00% |
| After-tax WACC | 3.8% | 6.1% |
| Selected WACC | 4.9% | |
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 1904.TW:
cost_of_equity (6.20%) = risk_free_rate (2.25%) + equity_risk_premium (6.50%) * adjusted_beta (0.37) + risk_adjustments (0.75%)
We include the risk adjustments, which range from 0% to 1%, to keep our WACC conservatives, especially for companies traded in developing markets.