The WACC of Eastcoast Steel Ltd (520081.BO) is 9.6%.
| Range | Selected | |
| Cost of equity | 10.20% - 12.10% | 11.15% |
| Tax rate | 11.70% - 16.20% | 13.95% |
| Cost of debt | 4.00% - 7.80% | 5.90% |
| WACC | 8.6% - 10.7% | 9.6% |
| Category | Low | High |
| Long-term bond rate | 6.9% | 7.4% |
| Equity market risk premium | 8.3% | 9.3% |
| Adjusted beta | 0.4 | 0.45 |
| Additional risk adjustments | 0.0% | 0.5% |
| Cost of equity | 10.20% | 12.10% |
| Tax rate | 11.70% | 16.20% |
| Debt/Equity ratio | 0.33 | 0.33 |
| Cost of debt | 4.00% | 7.80% |
| After-tax WACC | 8.6% | 10.7% |
| Selected WACC | 9.6% | |
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 520081.BO:
cost_of_equity (11.15%) = risk_free_rate (7.15%) + equity_risk_premium (8.80%) * 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.