The WACC of Saigon Machinery Spare Parts JSC (SMA.VN) is 6.7%.
| Range | Selected | |
| Cost of equity | 7.40% - 9.40% | 8.40% |
| Tax rate | 5.80% - 12.60% | 9.20% |
| Cost of debt | 4.00% - 7.00% | 5.50% |
| WACC | 5.6% - 7.8% | 6.7% |
| Category | Low | High |
| Long-term bond rate | 2.7% | 3.2% |
| Equity market risk premium | 9.5% | 10.5% |
| Adjusted beta | 0.49 | 0.54 |
| Additional risk adjustments | 0.0% | 0.5% |
| Cost of equity | 7.40% | 9.40% |
| Tax rate | 5.80% | 12.60% |
| Debt/Equity ratio | 0.98 | 0.98 |
| Cost of debt | 4.00% | 7.00% |
| After-tax WACC | 5.6% | 7.8% |
| Selected WACC | 6.7% | |
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 SMA.VN:
cost_of_equity (8.40%) = risk_free_rate (2.95%) + equity_risk_premium (10.00%) * adjusted_beta (0.49) + 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.