The WACC of Daio Paper Corp (3880.T) is 4.2%.
| Range | Selected | |
| Cost of equity | 4.40% - 8.90% | 6.65% |
| Tax rate | 35.00% - 36.60% | 35.80% |
| Cost of debt | 4.00% - 6.60% | 5.30% |
| WACC | 3.0% - 5.3% | 4.2% |
| Category | Low | High |
| Long-term bond rate | 1.4% | 1.9% |
| Equity market risk premium | 6.1% | 7.1% |
| Adjusted beta | 0.49 | 0.92 |
| Additional risk adjustments | 0.0% | 0.5% |
| Cost of equity | 4.40% | 8.90% |
| Tax rate | 35.00% | 36.60% |
| Debt/Equity ratio | 3.31 | 3.31 |
| Cost of debt | 4.00% | 6.60% |
| After-tax WACC | 3.0% | 5.3% |
| Selected WACC | 4.2% | |
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 3880.T:
cost_of_equity (6.65%) = risk_free_rate (1.65%) + equity_risk_premium (6.60%) * adjusted_beta (0.49) + 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.