The WACC of China MeiDong Auto Holdings Ltd (1268.HK) is 7.3%.
| Range | Selected | |
| Cost of equity | 10.90% - 15.10% | 13.00% |
| Tax rate | 26.00% - 30.30% | 28.15% |
| Cost of debt | 5.90% - 6.00% | 5.95% |
| WACC | 6.6% - 8.0% | 7.3% |
| Category | Low | High |
| Long-term bond rate | 2.9% | 3.4% |
| Equity market risk premium | 6.0% | 7.0% |
| Adjusted beta | 1.35 | 1.6 |
| Additional risk adjustments | 0.0% | 0.5% |
| Cost of equity | 10.90% | 15.10% |
| Tax rate | 26.00% | 30.30% |
| Debt/Equity ratio | 1.85 | 1.85 |
| Cost of debt | 5.90% | 6.00% |
| After-tax WACC | 6.6% | 8.0% |
| Selected WACC | 7.3% | |
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 1268.HK:
cost_of_equity (13.00%) = risk_free_rate (3.15%) + equity_risk_premium (6.50%) * adjusted_beta (1.35) + 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.