7267.T WACC - Weighted Average Cost of Capital

The WACC of Honda Motor Co Ltd (7267.T) is 6.4%.

The Cost of Equity of Honda Motor Co Ltd (7267.T) is 12.25%.

The Cost of Debt of Honda Motor Co Ltd (7267.T) is 4.50%.

	Range	Selected
Cost of equity	10.60% - 13.90%	12.25%
Tax rate	26.40% - 28.40%	27.40%
Cost of debt	4.00% - 5.00%	4.50%
WACC	5.6% - 7.2%	6.4%

WACC

7267.T WACC calculation

Category	Low	High

Long-term bond rate	1.4%	1.9%
Equity market risk premium	6.1%	7.1%
Adjusted beta	1.51	1.62

Additional risk adjustments	0.0%	0.5%
Cost of equity	10.60%	13.90%

Tax rate	26.40%	28.40%
Debt/Equity ratio	1.86	1.86
Cost of debt	4.00%	5.00%

After-tax WACC	5.6%	7.2%


Selected WACC	6.4%

7267.T's CAPM model and how its cost of Equity is calculated

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 7267.T:

cost_of_equity (12.25%) = risk_free_rate (1.65%) + equity_risk_premium (6.60%) * adjusted_beta (1.51) + 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.