The WACC of APAC Resources Ltd (1104.HK) is 8.0%.
| Range | Selected | |
| Cost of equity | 5.20% - 6.80% | 6.00% |
| Tax rate | 3.00% - 5.80% | 4.40% |
| Cost of debt | 7.00% - 32.70% | 19.85% |
| WACC | 5.5% - 10.5% | 8.0% |
| Category | Low | High |
| Long-term bond rate | 2.9% | 3.4% |
| Equity market risk premium | 6.0% | 7.0% |
| Adjusted beta | 0.31 | 0.35 |
| Additional risk adjustments | 0.5% | 1.0% |
| Cost of equity | 5.20% | 6.80% |
| Tax rate | 3.00% | 5.80% |
| Debt/Equity ratio | 0.18 | 0.18 |
| Cost of debt | 7.00% | 32.70% |
| After-tax WACC | 5.5% | 10.5% |
| Selected WACC | 8.0% | |
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 1104.HK:
cost_of_equity (6.00%) = risk_free_rate (3.15%) + equity_risk_premium (6.50%) * adjusted_beta (0.31) + risk_adjustments (0.75%)
We include the risk adjustments, which range from 0% to 1%, to keep our WACC conservatives, especially for companies traded in developing markets.