The WACC of Frencken Group Ltd (E28.SI) is 5.3%.
| Range | Selected | |
| Cost of equity | 4.30% - 6.80% | 5.55% |
| Tax rate | 19.50% - 20.40% | 19.95% |
| Cost of debt | 4.00% - 4.50% | 4.25% |
| WACC | 4.2% - 6.5% | 5.3% |
| Category | Low | High |
| Long-term bond rate | 2.7% | 3.2% |
| Equity market risk premium | 5.1% | 6.1% |
| Adjusted beta | 0.31 | 0.51 |
| Additional risk adjustments | 0.0% | 0.5% |
| Cost of equity | 4.30% | 6.80% |
| Tax rate | 19.50% | 20.40% |
| Debt/Equity ratio | 0.1 | 0.1 |
| Cost of debt | 4.00% | 4.50% |
| After-tax WACC | 4.2% | 6.5% |
| Selected WACC | 5.3% | |
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 E28.SI:
cost_of_equity (5.55%) = risk_free_rate (2.95%) + equity_risk_premium (5.60%) * adjusted_beta (0.31) + 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.