The WACC of Shimane Bank Ltd (7150.T) is 5.2%.
| Range | Selected | |
| Cost of equity | 7.10% - 13.40% | 10.25% |
| Tax rate | 11.10% - 19.10% | 15.10% |
| Cost of debt | 5.00% - 5.00% | 5.00% |
| WACC | 4.9% - 5.6% | 5.2% |
| Category | Low | High |
| Long-term bond rate | 1.4% | 1.9% |
| Equity market risk premium | 6.1% | 7.1% |
| Adjusted beta | 0.94 | 1.55 |
| Additional risk adjustments | 0.0% | 0.5% |
| Cost of equity | 7.10% | 13.40% |
| Tax rate | 11.10% | 19.10% |
| Debt/Equity ratio | 5.18 | 5.18 |
| Cost of debt | 5.00% | 5.00% |
| After-tax WACC | 4.9% | 5.6% |
| Selected WACC | 5.2% | |
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 7150.T:
cost_of_equity (10.25%) = risk_free_rate (1.65%) + equity_risk_premium (6.60%) * adjusted_beta (0.94) + 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.