The WACC of Metal Component Engineering Ltd (5DX.SI) is 5.9%.
| Range | Selected | |
| Cost of equity | 4.90% - 6.80% | 5.85% |
| Tax rate | -% - 0.20% | 0.10% |
| Cost of debt | 4.70% - 7.00% | 5.85% |
| WACC | 4.9% - 6.9% | 5.9% |
| Category | Low | High |
| Long-term bond rate | 2.7% | 3.2% |
| Equity market risk premium | 5.1% | 6.1% |
| Adjusted beta | 0.34 | 0.43 |
| Additional risk adjustments | 0.5% | 1.0% |
| Cost of equity | 4.90% | 6.80% |
| Tax rate | -% | 0.20% |
| Debt/Equity ratio | 0.34 | 0.34 |
| Cost of debt | 4.70% | 7.00% |
| After-tax WACC | 4.9% | 6.9% |
| Selected WACC | 5.9% | |
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 5DX.SI:
cost_of_equity (5.85%) = risk_free_rate (2.95%) + equity_risk_premium (5.60%) * adjusted_beta (0.34) + risk_adjustments (0.75%)
We include the risk adjustments, which range from 0% to 1%, to keep our WACC conservatives, especially for companies traded in developing markets.