The WACC of Lotus Pharmaceutical Co Ltd (1795.TW) is 7.7%.
| Range | Selected | |
| Cost of equity | 4.40% - 6.70% | 5.55% |
| Tax rate | 20.00% - 21.50% | 20.75% |
| Cost of debt | 5.50% - 19.00% | 12.25% |
| WACC | 4.4% - 10.9% | 7.7% |
| Category | Low | High |
| Long-term bond rate | 2.0% | 2.5% |
| Equity market risk premium | 6.0% | 7.0% |
| Adjusted beta | 0.4 | 0.52 |
| Additional risk adjustments | 0.0% | 0.5% |
| Cost of equity | 4.40% | 6.70% |
| Tax rate | 20.00% | 21.50% |
| Debt/Equity ratio | 1.06 | 1.06 |
| Cost of debt | 5.50% | 19.00% |
| After-tax WACC | 4.4% | 10.9% |
| Selected WACC | 7.7% | |
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 1795.TW:
cost_of_equity (5.55%) = risk_free_rate (2.25%) + equity_risk_premium (6.50%) * adjusted_beta (0.4) + 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.