The WACC of Cheng Shin Rubber Ind. Co Ltd (2105.TW) is 6.1%.
| Range | Selected | |
| Cost of equity | 5.70% - 8.30% | 7.00% |
| Tax rate | 26.30% - 27.20% | 26.75% |
| Cost of debt | 4.00% - 4.50% | 4.25% |
| WACC | 5.0% - 7.1% | 6.1% |
| Category | Low | High |
| Long-term bond rate | 2.0% | 2.5% |
| Equity market risk premium | 6.0% | 7.0% |
| Adjusted beta | 0.61 | 0.75 |
| Additional risk adjustments | 0.0% | 0.5% |
| Cost of equity | 5.70% | 8.30% |
| Tax rate | 26.30% | 27.20% |
| Debt/Equity ratio | 0.3 | 0.3 |
| Cost of debt | 4.00% | 4.50% |
| After-tax WACC | 5.0% | 7.1% |
| Selected WACC | 6.1% | |
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 2105.TW:
cost_of_equity (7.00%) = risk_free_rate (2.25%) + equity_risk_premium (6.50%) * adjusted_beta (0.61) + 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.