000488.SZ WACC - Weighted Average Cost of Capital

The WACC of Shandong Chenming Paper Holdings Ltd (000488.SZ) is 6.0%.

The Cost of Equity of Shandong Chenming Paper Holdings Ltd (000488.SZ) is 24.20%.

The Cost of Debt of Shandong Chenming Paper Holdings Ltd (000488.SZ) is 5.00%.

	Range	Selected
Cost of equity	17.70% - 30.70%	24.20%
Tax rate	11.10% - 16.30%	13.70%
Cost of debt	5.00% - 5.00%	5.00%
WACC	5.6% - 6.4%	6.0%

WACC

000488.SZ WACC calculation

Category	Low	High

Long-term bond rate	2.7%	3.2%
Equity market risk premium	6.1%	7.1%
Adjusted beta	2.45	3.8

Additional risk adjustments	0.0%	0.5%
Cost of equity	17.70%	30.70%

Tax rate	11.10%	16.30%
Debt/Equity ratio	10.74	10.74
Cost of debt	5.00%	5.00%

After-tax WACC	5.6%	6.4%


Selected WACC	6.0%

000488.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 000488.SZ:

cost_of_equity (24.20%) = risk_free_rate (2.95%) + equity_risk_premium (6.60%) * adjusted_beta (2.45) + 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.