The WACC of Reach Energy Bhd (REACH.KL) is 5.5%.
| Range | Selected | |
| Cost of equity | 82.40% - 137.00% | 109.70% |
| Tax rate | 14.80% - 19.00% | 16.90% |
| Cost of debt | 4.00% - 4.50% | 4.25% |
| WACC | 4.9% - 6.2% | 5.5% |
| Category | Low | High |
| Long-term bond rate | 3.8% | 4.3% |
| Equity market risk premium | 6.9% | 7.8% |
| Adjusted beta | 11.47 | 16.84 |
| Additional risk adjustments | 0.0% | 0.5% |
| Cost of equity | 82.40% | 137.00% |
| Tax rate | 14.80% | 19.00% |
| Debt/Equity ratio | 51.48 | 51.48 |
| Cost of debt | 4.00% | 4.50% |
| After-tax WACC | 4.9% | 6.2% |
| Selected WACC | 5.5% | |
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 REACH.KL:
cost_of_equity (109.70%) = risk_free_rate (4.05%) + equity_risk_premium (7.35%) * adjusted_beta (11.47) + 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.