The WACC of Newater Technology Inc (NEWA) is 7.0%.
| Range | Selected | |
| Cost of equity | 6.80% - 9.80% | 8.30% |
| Tax rate | 17.30% - 18.60% | 17.95% |
| Cost of debt | 4.30% - 7.90% | 6.10% |
| WACC | 5.6% - 8.5% | 7.0% |
| Category | Low | High |
| Long-term bond rate | 3.2% | 3.7% |
| Equity market risk premium | 4.2% | 5.2% |
| Adjusted beta | 0.85 | 1.07 |
| Additional risk adjustments | 0.0% | 0.5% |
| Cost of equity | 6.80% | 9.80% |
| Tax rate | 17.30% | 18.60% |
| Debt/Equity ratio | 0.61 | 0.61 |
| Cost of debt | 4.30% | 7.90% |
| After-tax WACC | 5.6% | 8.5% |
| Selected WACC | 7.0% | |
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 NEWA:
cost_of_equity (8.30%) = risk_free_rate (3.45%) + equity_risk_premium (4.70%) * adjusted_beta (0.85) + 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.