002644.SZ WACC - Weighted Average Cost of Capital

The WACC of Lanzhou Foci Pharmaceutical Co Ltd (002644.SZ) is 10.5%.

The Cost of Equity of Lanzhou Foci Pharmaceutical Co Ltd (002644.SZ) is 10.70%.

The Cost of Debt of Lanzhou Foci Pharmaceutical Co Ltd (002644.SZ) is 5.00%.

	Range	Selected
Cost of equity	9.60% - 11.80%	10.70%
Tax rate	16.10% - 16.40%	16.25%
Cost of debt	5.00% - 5.00%	5.00%
WACC	9.5% - 11.6%	10.5%

WACC

002644.SZ WACC calculation

Category	Low	High

Long-term bond rate	2.7%	3.2%
Equity market risk premium	6.1%	7.1%
Adjusted beta	1.12	1.13

Additional risk adjustments	0.0%	0.5%
Cost of equity	9.60%	11.80%

Tax rate	16.10%	16.40%
Debt/Equity ratio	0.02	0.02
Cost of debt	5.00%	5.00%

After-tax WACC	9.5%	11.6%


Selected WACC	10.5%

002644.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 002644.SZ:

cost_of_equity (10.70%) = risk_free_rate (2.95%) + equity_risk_premium (6.60%) * adjusted_beta (1.12) + 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.