002535.SZ WACC - Weighted Average Cost of Capital

The WACC of Linzhou Heavy Machinery Group Co Ltd (002535.SZ) is 8.6%.

The Cost of Equity of Linzhou Heavy Machinery Group Co Ltd (002535.SZ) is 12.20%.

The Cost of Debt of Linzhou Heavy Machinery Group Co Ltd (002535.SZ) is 5.00%.

	Range	Selected
Cost of equity	9.60% - 14.80%	12.20%
Tax rate	12.50% - 21.20%	16.85%
Cost of debt	5.00% - 5.00%	5.00%
WACC	7.2% - 9.9%	8.6%

WACC

002535.SZ WACC calculation

Category	Low	High

Long-term bond rate	2.7%	3.2%
Equity market risk premium	6.1%	7.1%
Adjusted beta	1.13	1.57

Additional risk adjustments	0.0%	0.5%
Cost of equity	9.60%	14.80%

Tax rate	12.50%	21.20%
Debt/Equity ratio	0.82	0.82
Cost of debt	5.00%	5.00%

After-tax WACC	7.2%	9.9%


Selected WACC	8.6%

002535.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 002535.SZ:

cost_of_equity (12.20%) = risk_free_rate (2.95%) + equity_risk_premium (6.60%) * adjusted_beta (1.13) + 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.