The WACC of OptoElectronics Co Ltd (6664.T) is 7.2%.
| Range | Selected | |
| Cost of equity | 11.90% - 25.40% | 18.65% |
| Tax rate | 11.20% - 33.90% | 22.55% |
| Cost of debt | 4.00% - 7.00% | 5.50% |
| WACC | 5.3% - 9.0% | 7.2% |
| Category | Low | High |
| Long-term bond rate | 1.4% | 1.9% |
| Equity market risk premium | 6.1% | 7.1% |
| Adjusted beta | 1.71 | 3.23 |
| Additional risk adjustments | 0.0% | 0.5% |
| Cost of equity | 11.90% | 25.40% |
| Tax rate | 11.20% | 33.90% |
| Debt/Equity ratio | 3.72 | 3.72 |
| Cost of debt | 4.00% | 7.00% |
| After-tax WACC | 5.3% | 9.0% |
| Selected WACC | 7.2% | |
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 6664.T:
cost_of_equity (18.65%) = risk_free_rate (1.65%) + equity_risk_premium (6.60%) * adjusted_beta (1.71) + 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.