The WACC of Aruhi Corp (7198.T) is 4.1%.
| Range | Selected | |
| Cost of equity | 6.00% - 10.30% | 8.15% |
| Tax rate | 31.70% - 33.60% | 32.65% |
| Cost of debt | 4.00% - 5.00% | 4.50% |
| WACC | 3.4% - 4.8% | 4.1% |
| Category | Low | High |
| Long-term bond rate | 1.4% | 1.9% |
| Equity market risk premium | 6.1% | 7.1% |
| Adjusted beta | 0.76 | 1.12 |
| Additional risk adjustments | 0.0% | 0.5% |
| Cost of equity | 6.00% | 10.30% |
| Tax rate | 31.70% | 33.60% |
| Debt/Equity ratio | 3.74 | 3.74 |
| Cost of debt | 4.00% | 5.00% |
| After-tax WACC | 3.4% | 4.8% |
| Selected WACC | 4.1% | |
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 7198.T:
cost_of_equity (8.15%) = risk_free_rate (1.65%) + equity_risk_premium (6.60%) * adjusted_beta (0.76) + 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.