The WACC of Saudi Automotive Services Co SJSC (4050.SR) is 8.4%.
| Range | Selected | |
| Cost of equity | 8.90% - 10.90% | 9.90% |
| Tax rate | 6.50% - 7.60% | 7.05% |
| Cost of debt | 4.00% - 11.10% | 7.55% |
| WACC | 6.3% - 10.6% | 8.4% |
| Category | Low | High |
| Long-term bond rate | 5.9% | 6.4% |
| Equity market risk premium | 6.1% | 7.1% |
| Adjusted beta | 0.49 | 0.55 |
| Additional risk adjustments | 0.0% | 0.5% |
| Cost of equity | 8.90% | 10.90% |
| Tax rate | 6.50% | 7.60% |
| Debt/Equity ratio | 1.05 | 1.05 |
| Cost of debt | 4.00% | 11.10% |
| After-tax WACC | 6.3% | 10.6% |
| Selected WACC | 8.4% | |
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 4050.SR:
cost_of_equity (9.90%) = risk_free_rate (6.15%) + 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.