2705.T WACC - Weighted Average Cost of Capital

The WACC of Ootoya Holdings Co Ltd (2705.T) is 5.5%.

The Cost of Equity of Ootoya Holdings Co Ltd (2705.T) is 5.60%.

The Cost of Debt of Ootoya Holdings Co Ltd (2705.T) is 4.25%.

	Range	Selected
Cost of equity	4.30% - 6.90%	5.60%
Tax rate	16.90% - 24.50%	20.70%
Cost of debt	4.00% - 4.50%	4.25%
WACC	4.3% - 6.8%	5.5%

WACC

2705.T WACC calculation

Category	Low	High

Long-term bond rate	1.4%	1.9%
Equity market risk premium	6.1%	7.1%
Adjusted beta	0.48	0.63

Additional risk adjustments	0.0%	0.5%
Cost of equity	4.30%	6.90%

Tax rate	16.90%	24.50%
Debt/Equity ratio	0.03	0.03
Cost of debt	4.00%	4.50%

After-tax WACC	4.3%	6.8%


Selected WACC	5.5%

2705.T's CAPM model and how its cost of Equity is calculated

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 2705.T:

cost_of_equity (5.60%) = risk_free_rate (1.65%) + equity_risk_premium (6.60%) * adjusted_beta (0.48) + 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.