The WACC of Kao Hsiung Chang Iron & Steel Corp (2008.TW) is 5.6%.
| Range | Selected | |
| Cost of equity | 4.90% - 7.10% | 6.00% |
| Tax rate | 5.70% - 15.70% | 10.70% |
| Cost of debt | 4.00% - 7.30% | 5.65% |
| WACC | 4.4% - 6.7% | 5.6% |
| Category | Low | High |
| Long-term bond rate | 2.0% | 2.5% |
| Equity market risk premium | 6.0% | 7.0% |
| Adjusted beta | 0.47 | 0.58 |
| Additional risk adjustments | 0.0% | 0.5% |
| Cost of equity | 4.90% | 7.10% |
| Tax rate | 5.70% | 15.70% |
| Debt/Equity ratio | 0.71 | 0.71 |
| Cost of debt | 4.00% | 7.30% |
| After-tax WACC | 4.4% | 6.7% |
| Selected WACC | 5.6% | |
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 2008.TW:
cost_of_equity (6.00%) = risk_free_rate (2.25%) + equity_risk_premium (6.50%) * adjusted_beta (0.47) + 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.