The WACC of DRB-Hicom Bhd (DRBHCOM.KL) is 7.9%.
| Range | Selected | |
| Cost of equity | 15.20% - 23.50% | 19.35% |
| Tax rate | 16.60% - 23.50% | 20.05% |
| Cost of debt | 4.90% - 9.00% | 6.95% |
| WACC | 6.0% - 9.8% | 7.9% |
| Category | Low | High |
| Long-term bond rate | 3.8% | 4.3% |
| Equity market risk premium | 6.9% | 7.8% |
| Adjusted beta | 1.67 | 2.39 |
| Additional risk adjustments | 0.0% | 0.5% |
| Cost of equity | 15.20% | 23.50% |
| Tax rate | 16.60% | 23.50% |
| Debt/Equity ratio | 4.85 | 4.85 |
| Cost of debt | 4.90% | 9.00% |
| After-tax WACC | 6.0% | 9.8% |
| Selected WACC | 7.9% | |
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 DRBHCOM.KL:
cost_of_equity (19.35%) = risk_free_rate (4.05%) + equity_risk_premium (7.35%) * adjusted_beta (1.67) + 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.