The WACC of Adaro Energy Tbk PT (ADRO.JK) is 14.1%.
| Range | Selected | |
| Cost of equity | 13.70% - 18.50% | 16.10% |
| Tax rate | 20.80% - 25.10% | 22.95% |
| Cost of debt | 4.00% - 7.00% | 5.50% |
| WACC | 11.9% - 16.3% | 14.1% |
| Category | Low | High |
| Long-term bond rate | 6.6% | 7.1% |
| Equity market risk premium | 7.9% | 8.9% |
| Adjusted beta | 0.9 | 1.22 |
| Additional risk adjustments | 0.0% | 0.5% |
| Cost of equity | 13.70% | 18.50% |
| Tax rate | 20.80% | 25.10% |
| Debt/Equity ratio | 0.2 | 0.2 |
| Cost of debt | 4.00% | 7.00% |
| After-tax WACC | 11.9% | 16.3% |
| Selected WACC | 14.1% | |
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 ADRO.JK:
cost_of_equity (16.10%) = risk_free_rate (6.85%) + equity_risk_premium (8.40%) * adjusted_beta (0.9) + 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.