The WACC of South West PetroVietnam Fertilizer and Chemicals JSC (PSW.VN) is 7.1%.
| Range | Selected | |
| Cost of equity | 6.60% - 8.50% | 7.55% |
| Tax rate | 20.70% - 21.30% | 21.00% |
| Cost of debt | 4.00% - 4.50% | 4.25% |
| WACC | 6.3% - 8.0% | 7.1% |
| Category | Low | High |
| Long-term bond rate | 2.7% | 3.2% |
| Equity market risk premium | 9.5% | 10.5% |
| Adjusted beta | 0.41 | 0.45 |
| Additional risk adjustments | 0.0% | 0.5% |
| Cost of equity | 6.60% | 8.50% |
| Tax rate | 20.70% | 21.30% |
| Debt/Equity ratio | 0.12 | 0.12 |
| Cost of debt | 4.00% | 4.50% |
| After-tax WACC | 6.3% | 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 PSW.VN:
cost_of_equity (7.55%) = risk_free_rate (2.95%) + equity_risk_premium (10.00%) * adjusted_beta (0.41) + 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.