The WACC of Nam Tai Property Inc (NTP) is 72.1%.
| Range | Selected | |
| Cost of equity | 7.60% - 10.00% | 8.80% |
| Tax rate | 10.70% - 16.60% | 13.65% |
| Cost of debt | 4.90% - 372.40% | 188.65% |
| WACC | 6.2% - 138.0% | 72.1% |
| Category | Low | High |
| Long-term bond rate | 4.2% | 4.7% |
| Equity market risk premium | 5.0% | 6.0% |
| Adjusted beta | 0.68 | 0.8 |
| Additional risk adjustments | 0.0% | 0.5% |
| Cost of equity | 7.60% | 10.00% |
| Tax rate | 10.70% | 16.60% |
| Debt/Equity ratio | 0.74 | 0.74 |
| Cost of debt | 4.90% | 372.40% |
| After-tax WACC | 6.2% | 138.0% |
| Selected WACC | 72.1% | |
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 NTP:
cost_of_equity (8.80%) = risk_free_rate (4.45%) + equity_risk_premium (5.50%) * adjusted_beta (0.68) + 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.