The WACC of Al Yamamah Steel Industries Company CJSC (1304.SR) is 12.5%.
| Range | Selected | |
| Cost of equity | 12.80% - 17.40% | 15.10% |
| Tax rate | 6.60% - 10.70% | 8.65% |
| Cost of debt | 7.00% - 7.00% | 7.00% |
| WACC | 10.9% - 14.0% | 12.5% |
| Category | Low | High |
| Long-term bond rate | 5.9% | 6.4% |
| Equity market risk premium | 6.1% | 7.1% |
| Adjusted beta | 1.13 | 1.47 |
| Additional risk adjustments | 0.0% | 0.5% |
| Cost of equity | 12.80% | 17.40% |
| Tax rate | 6.60% | 10.70% |
| Debt/Equity ratio | 0.43 | 0.43 |
| Cost of debt | 7.00% | 7.00% |
| After-tax WACC | 10.9% | 14.0% |
| Selected WACC | 12.5% | |
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 1304.SR:
cost_of_equity (15.10%) = risk_free_rate (6.15%) + equity_risk_premium (6.60%) * adjusted_beta (1.13) + 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.