000702.SZ WACC - Weighted Average Cost of Capital

The WACC of Hunan Zhenghong Science and Technology Develop Co Ltd (000702.SZ) is 9.0%.

The Cost of Equity of Hunan Zhenghong Science and Technology Develop Co Ltd (000702.SZ) is 9.50%.

The Cost of Debt of Hunan Zhenghong Science and Technology Develop Co Ltd (000702.SZ) is 5.00%.

	Range	Selected
Cost of equity	7.90% - 11.10%	9.50%
Tax rate	0.20% - 0.50%	0.35%
Cost of debt	5.00% - 5.00%	5.00%
WACC	7.5% - 10.4%	9.0%

WACC

000702.SZ WACC calculation

Category	Low	High

Long-term bond rate	2.7%	3.2%
Equity market risk premium	6.1%	7.1%
Adjusted beta	0.85	1.04

Additional risk adjustments	0.0%	0.5%
Cost of equity	7.90%	11.10%

Tax rate	0.20%	0.50%
Debt/Equity ratio	0.13	0.13
Cost of debt	5.00%	5.00%

After-tax WACC	7.5%	10.4%


Selected WACC	9.0%

000702.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 000702.SZ:

cost_of_equity (9.50%) = risk_free_rate (2.95%) + equity_risk_premium (6.60%) * adjusted_beta (0.85) + 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.