The WACC of EMC PCL (EMC.BK) is 7.1%.
| Range | Selected | |
| Cost of equity | 5.40% - 8.00% | 6.70% |
| Tax rate | 1.70% - 2.60% | 2.15% |
| Cost of debt | 7.00% - 8.30% | 7.65% |
| WACC | 6.2% - 8.0% | 7.1% |
| Category | Low | High |
| Long-term bond rate | 2.6% | 3.1% |
| Equity market risk premium | 7.4% | 8.4% |
| Adjusted beta | 0.18 | 0.35 |
| Additional risk adjustments | 1.5% | 2.0% |
| Cost of equity | 5.40% | 8.00% |
| Tax rate | 1.70% | 2.60% |
| Debt/Equity ratio | 1.28 | 1.28 |
| Cost of debt | 7.00% | 8.30% |
| After-tax WACC | 6.2% | 8.0% |
| Selected WACC | 7.1% | |
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 EMC.BK:
cost_of_equity (6.70%) = risk_free_rate (2.85%) + equity_risk_premium (7.90%) * adjusted_beta (0.18) + risk_adjustments (1.75%)
We include the risk adjustments, which range from 0% to 1%, to keep our WACC conservatives, especially for companies traded in developing markets.