The WACC of Nippan Rental Co Ltd (4669.T) is 5.3%.
| Range | Selected | |
| Cost of equity | 6.90% - 10.40% | 8.65% |
| Tax rate | 36.40% - 37.60% | 37.00% |
| Cost of debt | 4.00% - 10.20% | 7.10% |
| WACC | 3.5% - 7.2% | 5.3% |
| Category | Low | High |
| Long-term bond rate | 0.8% | 1.2% |
| Equity market risk premium | 5.4% | 6.4% |
| Adjusted beta | 1.13 | 1.34 |
| Additional risk adjustments | 0.0% | 0.5% |
| Cost of equity | 6.90% | 10.40% |
| Tax rate | 36.40% | 37.60% |
| Debt/Equity ratio | 3.7 | 3.7 |
| Cost of debt | 4.00% | 10.20% |
| After-tax WACC | 3.5% | 7.2% |
| Selected WACC | 5.3% | |
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 4669.T:
cost_of_equity (8.65%) = risk_free_rate (1.00%) + equity_risk_premium (5.90%) * adjusted_beta (1.13) + 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.