The WACC of City Auto Corp (CTF.VN) is 8.5%.
| Range | Selected | |
| Cost of equity | 7.60% - 9.80% | 8.70% |
| Tax rate | 16.80% - 18.10% | 17.45% |
| Cost of debt | 6.60% - 12.70% | 9.65% |
| WACC | 7.0% - 10.0% | 8.5% |
| Category | Low | High |
| Long-term bond rate | 3.3% | 3.8% |
| Equity market risk premium | 8.3% | 9.3% |
| Adjusted beta | 0.52 | 0.59 |
| Additional risk adjustments | 0.0% | 0.5% |
| Cost of equity | 7.60% | 9.80% |
| Tax rate | 16.80% | 18.10% |
| Debt/Equity ratio | 0.42 | 0.42 |
| Cost of debt | 6.60% | 12.70% |
| After-tax WACC | 7.0% | 10.0% |
| Selected WACC | 8.5% | |
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 CTF.VN:
cost_of_equity (8.70%) = risk_free_rate (3.55%) + equity_risk_premium (8.80%) * adjusted_beta (0.52) + 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.