4004.T WACC - Weighted Average Cost of Capital

The WACC of Showa Denko KK (4004.T) is 6.2%.

The Cost of Equity of Showa Denko KK (4004.T) is 11.00%.

The Cost of Debt of Showa Denko KK (4004.T) is 5.50%.

	Range	Selected
Cost of equity	9.40% - 12.60%	11.00%
Tax rate	17.90% - 34.90%	26.40%
Cost of debt	4.00% - 7.00%	5.50%
WACC	5.3% - 7.2%	6.2%

WACC

4004.T WACC calculation

Category	Low	High

Long-term bond rate	1.4%	1.9%
Equity market risk premium	6.1%	7.1%
Adjusted beta	1.3	1.44

Additional risk adjustments	0.0%	0.5%
Cost of equity	9.40%	12.60%

Tax rate	17.90%	34.90%
Debt/Equity ratio	2.04	2.04
Cost of debt	4.00%	7.00%

After-tax WACC	5.3%	7.2%


Selected WACC	6.2%

4004.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 4004.T:

cost_of_equity (11.00%) = risk_free_rate (1.65%) + equity_risk_premium (6.60%) * adjusted_beta (1.3) + 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.