The WACC of Far East Group Ltd (5TJ.SI) is 5.7%.
| Range | Selected | |
| Cost of equity | 5.40% - 10.40% | 7.90% |
| Tax rate | 7.30% - 14.10% | 10.70% |
| Cost of debt | 4.00% - 8.00% | 6.00% |
| WACC | 4.0% - 7.3% | 5.7% |
| Category | Low | High |
| Long-term bond rate | 2.7% | 3.2% |
| Equity market risk premium | 5.1% | 6.1% |
| Adjusted beta | 0.54 | 1.09 |
| Additional risk adjustments | 0.0% | 0.5% |
| Cost of equity | 5.40% | 10.40% |
| Tax rate | 7.30% | 14.10% |
| Debt/Equity ratio | 5.83 | 5.83 |
| Cost of debt | 4.00% | 8.00% |
| After-tax WACC | 4.0% | 7.3% |
| 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 5TJ.SI:
cost_of_equity (7.90%) = risk_free_rate (2.95%) + equity_risk_premium (5.60%) * adjusted_beta (0.54) + 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.