000968.SZ WACC - Weighted Average Cost of Capital

The WACC of Shanxi Blue Flame Holding Co Ltd (000968.SZ) is 7.2%.

The Cost of Equity of Shanxi Blue Flame Holding Co Ltd (000968.SZ) is 9.60%.

The Cost of Debt of Shanxi Blue Flame Holding Co Ltd (000968.SZ) is 5.00%.

	Range	Selected
Cost of equity	7.70% - 11.50%	9.60%
Tax rate	19.60% - 23.40%	21.50%
Cost of debt	5.00% - 5.00%	5.00%
WACC	6.1% - 8.3%	7.2%

WACC

000968.SZ WACC calculation

Category	Low	High

Long-term bond rate	2.7%	3.2%
Equity market risk premium	6.1%	7.1%
Adjusted beta	0.82	1.1

Additional risk adjustments	0.0%	0.5%
Cost of equity	7.70%	11.50%

Tax rate	19.60%	23.40%
Debt/Equity ratio	0.72	0.72
Cost of debt	5.00%	5.00%

After-tax WACC	6.1%	8.3%


Selected WACC	7.2%

000968.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 000968.SZ:

cost_of_equity (9.60%) = risk_free_rate (2.95%) + equity_risk_premium (6.60%) * adjusted_beta (0.82) + 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.