The WACC of Song Da Investment and Construction JSC (SDD.VN) is 4.0%.
| Range | Selected | |
| Cost of equity | 6.50% - 8.40% | 7.45% |
| Tax rate | 22.10% - 22.30% | 22.20% |
| Cost of debt | 4.00% - 4.50% | 4.25% |
| WACC | 3.7% - 4.3% | 4.0% |
| Category | Low | High |
| Long-term bond rate | 2.7% | 3.2% |
| Equity market risk premium | 9.5% | 10.5% |
| Adjusted beta | 0.39 | 0.44 |
| Additional risk adjustments | 0.0% | 0.5% |
| Cost of equity | 6.50% | 8.40% |
| Tax rate | 22.10% | 22.30% |
| Debt/Equity ratio | 5.22 | 5.22 |
| Cost of debt | 4.00% | 4.50% |
| After-tax WACC | 3.7% | 4.3% |
| Selected WACC | 4.0% | |
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 SDD.VN:
cost_of_equity (7.45%) = risk_free_rate (2.95%) + equity_risk_premium (10.00%) * adjusted_beta (0.39) + 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.