The WACC of Kobe Steel Ltd (5406.T) is 5.7%.
| Range | Selected | |
| Cost of equity | 7.80% - 10.20% | 9.00% |
| Tax rate | 22.20% - 23.60% | 22.90% |
| Cost of debt | 4.00% - 4.50% | 4.25% |
| WACC | 5.1% - 6.3% | 5.7% |
| Category | Low | High |
| Long-term bond rate | 1.4% | 1.9% |
| Equity market risk premium | 6.1% | 7.1% |
| Adjusted beta | 1.05 | 1.09 |
| Additional risk adjustments | 0.0% | 0.5% |
| Cost of equity | 7.80% | 10.20% |
| Tax rate | 22.20% | 23.60% |
| Debt/Equity ratio | 1.38 | 1.38 |
| Cost of debt | 4.00% | 4.50% |
| After-tax WACC | 5.1% | 6.3% |
| Selected WACC | 5.7% | |
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 5406.T:
cost_of_equity (9.00%) = risk_free_rate (1.65%) + equity_risk_premium (6.60%) * adjusted_beta (1.05) + 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.