The WACC of Kuala Lumpur Kepong Bhd (KLK.KL) is 8.6%.
| Range | Selected | |
| Cost of equity | 10.00% - 12.10% | 11.05% |
| Tax rate | 21.60% - 25.60% | 23.60% |
| Cost of debt | 4.30% - 5.50% | 4.90% |
| WACC | 7.7% - 9.4% | 8.6% |
| Category | Low | High |
| Long-term bond rate | 3.8% | 4.3% |
| Equity market risk premium | 6.9% | 7.8% |
| Adjusted beta | 0.9 | 0.93 |
| Additional risk adjustments | 0.0% | 0.5% |
| Cost of equity | 10.00% | 12.10% |
| Tax rate | 21.60% | 25.60% |
| Debt/Equity ratio | 0.51 | 0.51 |
| Cost of debt | 4.30% | 5.50% |
| After-tax WACC | 7.7% | 9.4% |
| Selected WACC | 8.6% | |
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 KLK.KL:
cost_of_equity (11.05%) = risk_free_rate (4.05%) + equity_risk_premium (7.35%) * 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.