The WACC of Saigontourist Transport Corp (STT.VN) is 6.0%.
| Range | Selected | |
| Cost of equity | 4.00% - 7.10% | 5.55% |
| Tax rate | 1.80% - 15.10% | 8.45% |
| Cost of debt | 7.00% - 7.00% | 7.00% |
| WACC | 5.4% - 6.5% | 6.0% |
| Category | Low | High |
| Long-term bond rate | 2.7% | 3.2% |
| Equity market risk premium | 9.5% | 10.5% |
| Adjusted beta | 0.13 | 0.32 |
| Additional risk adjustments | 0.0% | 0.5% |
| Cost of equity | 4.00% | 7.10% |
| Tax rate | 1.80% | 15.10% |
| Debt/Equity ratio | 1 | 1 |
| Cost of debt | 7.00% | 7.00% |
| After-tax WACC | 5.4% | 6.5% |
| Selected WACC | 6.0% | |
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 STT.VN:
cost_of_equity (5.55%) = risk_free_rate (2.95%) + equity_risk_premium (10.00%) * adjusted_beta (0.13) + 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.