The WACC of Pomina Steel Corp (POM.VN) is 7.3%.
| Range | Selected | |
| Cost of equity | 11.20% - 16.20% | 13.70% |
| Tax rate | -% - 6.20% | 3.10% |
| Cost of debt | 5.50% - 8.00% | 6.75% |
| WACC | 6.1% - 8.5% | 7.3% |
| Category | Low | High |
| Long-term bond rate | 2.7% | 3.2% |
| Equity market risk premium | 9.5% | 10.5% |
| Adjusted beta | 0.89 | 1.19 |
| Additional risk adjustments | 0.0% | 0.5% |
| Cost of equity | 11.20% | 16.20% |
| Tax rate | -% | 6.20% |
| Debt/Equity ratio | 7.93 | 7.93 |
| Cost of debt | 5.50% | 8.00% |
| After-tax WACC | 6.1% | 8.5% |
| Selected WACC | 7.3% | |
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 POM.VN:
cost_of_equity (13.70%) = risk_free_rate (2.95%) + equity_risk_premium (10.00%) * adjusted_beta (0.89) + 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.