The WACC of Southern Steel Bhd (SSTEEL.KL) is 7.2%.
| Range | Selected | |
| Cost of equity | 8.40% - 11.90% | 10.15% |
| Tax rate | 3.80% - 4.80% | 4.30% |
| Cost of debt | 4.10% - 7.00% | 5.55% |
| WACC | 5.7% - 8.7% | 7.2% |
| Category | Low | High |
| Long-term bond rate | 3.8% | 4.3% |
| Equity market risk premium | 6.9% | 7.8% |
| Adjusted beta | 0.67 | 0.9 |
| Additional risk adjustments | 0.0% | 0.5% |
| Cost of equity | 8.40% | 11.90% |
| Tax rate | 3.80% | 4.80% |
| Debt/Equity ratio | 1.59 | 1.59 |
| Cost of debt | 4.10% | 7.00% |
| After-tax WACC | 5.7% | 8.7% |
| Selected WACC | 7.2% | |
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 SSTEEL.KL:
cost_of_equity (10.15%) = risk_free_rate (4.05%) + equity_risk_premium (7.35%) * adjusted_beta (0.67) + 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.