1120.HK WACC - Weighted Average Cost of Capital

The WACC of Arts Optical International Holdings Ltd (1120.HK) is 5.8%.

The Cost of Equity of Arts Optical International Holdings Ltd (1120.HK) is 6.35%.

The Cost of Debt of Arts Optical International Holdings Ltd (1120.HK) is 4.70%.

	Range	Selected
Cost of equity	5.10% - 7.60%	6.35%
Tax rate	3.40% - 11.40%	7.40%
Cost of debt	4.00% - 5.40%	4.70%
WACC	4.7% - 6.8%	5.8%

WACC

1120.HK WACC calculation

Category	Low	High

Long-term bond rate	2.9%	3.4%
Equity market risk premium	6.0%	7.0%
Adjusted beta	0.37	0.53

Additional risk adjustments	0.0%	0.5%
Cost of equity	5.10%	7.60%

Tax rate	3.40%	11.40%
Debt/Equity ratio	0.41	0.41
Cost of debt	4.00%	5.40%

After-tax WACC	4.7%	6.8%


Selected WACC	5.8%

1120.HK'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 1120.HK:

cost_of_equity (6.35%) = risk_free_rate (3.15%) + equity_risk_premium (6.50%) * adjusted_beta (0.37) + 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.