The WACC of Tokushu Tokai Paper Co Ltd (3708.T) is 4.6%.
| Range | Selected | |
| Cost of equity | 3.90% - 6.90% | 5.40% |
| Tax rate | 19.80% - 22.60% | 21.20% |
| Cost of debt | 4.00% - 4.50% | 4.25% |
| WACC | 3.6% - 5.6% | 4.6% |
| Category | Low | High |
| Long-term bond rate | 1.4% | 1.9% |
| Equity market risk premium | 6.1% | 7.1% |
| Adjusted beta | 0.4 | 0.63 |
| Additional risk adjustments | 0.0% | 0.5% |
| Cost of equity | 3.90% | 6.90% |
| Tax rate | 19.80% | 22.60% |
| Debt/Equity ratio | 0.57 | 0.57 |
| Cost of debt | 4.00% | 4.50% |
| After-tax WACC | 3.6% | 5.6% |
| Selected WACC | 4.6% | |
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 3708.T:
cost_of_equity (5.40%) = risk_free_rate (1.65%) + equity_risk_premium (6.60%) * adjusted_beta (0.4) + 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.