The WACC of Nexteer Automotive Group Ltd (1316.HK) is 10.1%.
| Range | Selected | |
| Cost of equity | 8.90% - 11.90% | 10.40% |
| Tax rate | 29.30% - 31.00% | 30.15% |
| Cost of debt | 4.00% - 10.00% | 7.00% |
| WACC | 8.6% - 11.6% | 10.1% |
| Category | Low | High |
| Long-term bond rate | 2.9% | 3.4% |
| Equity market risk premium | 6.0% | 7.0% |
| Adjusted beta | 1.01 | 1.14 |
| Additional risk adjustments | 0.0% | 0.5% |
| Cost of equity | 8.90% | 11.90% |
| Tax rate | 29.30% | 31.00% |
| Debt/Equity ratio | 0.05 | 0.05 |
| Cost of debt | 4.00% | 10.00% |
| After-tax WACC | 8.6% | 11.6% |
| Selected WACC | 10.1% | |
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 1316.HK:
cost_of_equity (10.40%) = risk_free_rate (3.15%) + equity_risk_premium (6.50%) * adjusted_beta (1.01) + 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.