000404.SZ WACC - Weighted Average Cost of Capital

The WACC of Changhong Huayi Compressor Co Ltd (000404.SZ) is 10.7%.

The Cost of Equity of Changhong Huayi Compressor Co Ltd (000404.SZ) is 11.80%.

The Cost of Debt of Changhong Huayi Compressor Co Ltd (000404.SZ) is 5.00%.

	Range	Selected
Cost of equity	9.40% - 14.20%	11.80%
Tax rate	11.20% - 12.60%	11.90%
Cost of debt	5.00% - 5.00%	5.00%
WACC	8.7% - 12.8%	10.7%

WACC

000404.SZ WACC calculation

Category	Low	High

Long-term bond rate	2.7%	3.2%
Equity market risk premium	6.1%	7.1%
Adjusted beta	1.09	1.47

Additional risk adjustments	0.0%	0.5%
Cost of equity	9.40%	14.20%

Tax rate	11.20%	12.60%
Debt/Equity ratio	0.16	0.16
Cost of debt	5.00%	5.00%

After-tax WACC	8.7%	12.8%


Selected WACC	10.7%

000404.SZ's CAPM model and how its cost of Equity is calculated

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 000404.SZ:

cost_of_equity (11.80%) = risk_free_rate (2.95%) + equity_risk_premium (6.60%) * adjusted_beta (1.09) + 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.