The WACC of Guangzhou Yuexiu Financial Holdings Group Co Ltd (000987.SZ) is 6.4%.
| Range | Selected | |
| Cost of equity | 15.40% - 19.30% | 17.35% |
| Tax rate | 17.20% - 18.10% | 17.65% |
| Cost of debt | 5.00% - 5.00% | 5.00% |
| WACC | 6.1% - 6.8% | 6.4% |
| Category | Low | High |
| Long-term bond rate | 2.7% | 3.2% |
| Equity market risk premium | 6.1% | 7.1% |
| Adjusted beta | 2.08 | 2.2 |
| Additional risk adjustments | 0.0% | 0.5% |
| Cost of equity | 15.40% | 19.30% |
| Tax rate | 17.20% | 18.10% |
| Debt/Equity ratio | 4.7 | 4.7 |
| Cost of debt | 5.00% | 5.00% |
| After-tax WACC | 6.1% | 6.8% |
| Selected WACC | 6.4% | |
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 000987.SZ:
cost_of_equity (17.35%) = risk_free_rate (2.95%) + equity_risk_premium (6.60%) * adjusted_beta (2.08) + 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.