The WACC of Michinoku Bank Ltd (8350.T) is 3.9%.
| Range | Selected | |
| Cost of equity | 4.60% - 7.00% | 5.80% |
| Tax rate | 23.60% - 32.70% | 28.15% |
| Cost of debt | 5.00% - 5.00% | 5.00% |
| WACC | 3.9% - 3.8% | 3.9% |
| Category | Low | High |
| Long-term bond rate | 0.8% | 1.2% |
| Equity market risk premium | 5.4% | 6.4% |
| Adjusted beta | 0.71 | 0.81 |
| Additional risk adjustments | 0.0% | 0.5% |
| Cost of equity | 4.60% | 7.00% |
| Tax rate | 23.60% | 32.70% |
| Debt/Equity ratio | 6.96 | 6.96 |
| Cost of debt | 5.00% | 5.00% |
| After-tax WACC | 3.9% | 3.8% |
| Selected WACC | 3.9% | |
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 8350.T:
cost_of_equity (5.80%) = risk_free_rate (1.00%) + equity_risk_premium (5.90%) * adjusted_beta (0.71) + 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.