The WACC of Indofood Agri Resources Ltd (5JS.SI) is 5.4%.
| Range | Selected | |
| Cost of equity | 6.60% - 10.70% | 8.65% |
| Tax rate | 39.80% - 41.70% | 40.75% |
| Cost of debt | 4.00% - 5.90% | 4.95% |
| WACC | 4.2% - 6.6% | 5.4% |
| Category | Low | High |
| Long-term bond rate | 2.7% | 3.2% |
| Equity market risk premium | 5.1% | 6.1% |
| Adjusted beta | 0.77 | 1.15 |
| Additional risk adjustments | 0.0% | 0.5% |
| Cost of equity | 6.60% | 10.70% |
| Tax rate | 39.80% | 41.70% |
| Debt/Equity ratio | 1.34 | 1.34 |
| Cost of debt | 4.00% | 5.90% |
| After-tax WACC | 4.2% | 6.6% |
| Selected WACC | 5.4% | |
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 5JS.SI:
cost_of_equity (8.65%) = risk_free_rate (2.95%) + equity_risk_premium (5.60%) * adjusted_beta (0.77) + 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.