The WACC of Japan Steel Works Ltd (5631.T) is 7.4%.
Range | Selected | |
Cost of equity | 6.4% - 9.0% | 7.7% |
Tax rate | 27.0% - 31.3% | 29.15% |
Cost of debt | 4.0% - 4.5% | 4.25% |
WACC | 6.2% - 8.6% | 7.4% |
Category | Low | High |
Long-term bond rate | 1.4% | 1.9% |
Equity market risk premium | 6.1% | 7.1% |
Adjusted beta | 0.82 | 0.92 |
Additional risk adjustments | 0.0% | 0.5% |
Cost of equity | 6.4% | 9.0% |
Tax rate | 27.0% | 31.3% |
Debt/Equity ratio | 0.07 | 0.07 |
Cost of debt | 4.0% | 4.5% |
After-tax WACC | 6.2% | 8.6% |
Selected WACC | 7.4% | |
Debt/Equity | Unlevered | |||
Peers | Company Name | ratio | Beta | beta |
5631.T | Japan Steel Works Ltd | 0.07 | 1.52 | 1.44 |
5851.T | Ryobi Ltd | 0.86 | 1.09 | 0.68 |
6103.T | Okuma Corp | 0.04 | 1.39 | 1.35 |
6135.T | Makino Milling Machine Co Ltd | 0.2 | 0.96 | 0.84 |
6371.T | Tsubakimoto Chain Co | 0.14 | 0.94 | 0.85 |
6376.T | Nikkiso Co Ltd | 1.2 | 1.18 | 0.64 |
6406.T | Fujitec Co Ltd | 0.01 | 0.57 | 0.57 |
6457.T | Glory Ltd | 0.42 | 0.92 | 0.71 |
6474.T | Nachi-Fujikoshi Corp | 1.23 | 0.9 | 0.48 |
6508.T | Meidensha Corp | 0.26 | 1.13 | 0.95 |
Low | High | |
Unlevered beta | 0.7 | 0.84 |
Relevered beta | 0.73 | 0.88 |
Adjusted relevered beta | 0.82 | 0.92 |
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 5631.T:
cost_of_equity (7.70%) = risk_free_rate (1.65%) + equity_risk_premium (6.60%) * adjusted_beta (0.82) + 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.