The WACC of Refrigeration Electrical Engineering Corp (REE.VN) is 9.4%.
| Range | Selected | |
| Cost of equity | 9.00% - 11.90% | 10.45% |
| Tax rate | 10.30% - 10.90% | 10.60% |
| Cost of debt | 5.00% - 8.40% | 6.70% |
| WACC | 7.9% - 10.9% | 9.4% |
| Category | Low | High |
| Long-term bond rate | 2.7% | 3.2% |
| Equity market risk premium | 9.5% | 10.5% |
| Adjusted beta | 0.66 | 0.78 |
| Additional risk adjustments | 0.0% | 0.5% |
| Cost of equity | 9.00% | 11.90% |
| Tax rate | 10.30% | 10.90% |
| Debt/Equity ratio | 0.32 | 0.32 |
| Cost of debt | 5.00% | 8.40% |
| After-tax WACC | 7.9% | 10.9% |
| Selected WACC | 9.4% | |
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 REE.VN:
cost_of_equity (10.45%) = risk_free_rate (2.95%) + equity_risk_premium (10.00%) * adjusted_beta (0.66) + 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.