The WACC of Lotte Confectionery Co Ltd (280360.KS) is 5.4%.
| Range | Selected | |
| Cost of equity | 6.60% - 9.30% | 7.95% |
| Tax rate | 24.80% - 28.40% | 26.60% |
| Cost of debt | 4.00% - 5.30% | 4.65% |
| WACC | 4.6% - 6.3% | 5.4% |
| Category | Low | High |
| Long-term bond rate | 3.1% | 3.6% |
| Equity market risk premium | 5.8% | 6.8% |
| Adjusted beta | 0.6 | 0.77 |
| Additional risk adjustments | 0.0% | 0.5% |
| Cost of equity | 6.60% | 9.30% |
| Tax rate | 24.80% | 28.40% |
| Debt/Equity ratio | 1.23 | 1.23 |
| Cost of debt | 4.00% | 5.30% |
| After-tax WACC | 4.6% | 6.3% |
| Selected WACC | 5.4% | |
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 280360.KS:
cost_of_equity (7.95%) = risk_free_rate (3.35%) + equity_risk_premium (6.30%) * adjusted_beta (0.6) + 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.