The WACC of Towa Bank Ltd (8558.T) is 4.5%.
| Range | Selected | |
| Cost of equity | 7.70% - 13.60% | 10.65% |
| Tax rate | 28.30% - 38.30% | 33.30% |
| Cost of debt | 5.00% - 5.00% | 5.00% |
| WACC | 4.2% - 4.7% | 4.5% |
| Category | Low | High |
| Long-term bond rate | 1.4% | 1.9% |
| Equity market risk premium | 6.1% | 7.1% |
| Adjusted beta | 1.02 | 1.57 |
| Additional risk adjustments | 0.0% | 0.5% |
| Cost of equity | 7.70% | 13.60% |
| Tax rate | 28.30% | 38.30% |
| Debt/Equity ratio | 5.52 | 5.52 |
| Cost of debt | 5.00% | 5.00% |
| After-tax WACC | 4.2% | 4.7% |
| Selected WACC | 4.5% | |
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 8558.T:
cost_of_equity (10.65%) = risk_free_rate (1.65%) + equity_risk_premium (6.60%) * adjusted_beta (1.02) + 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.