The WACC of China Zhongdi Dairy Holdings Co Ltd (1492.HK) is 7.3%.
| Range | Selected | |
| Cost of equity | 8.70% - 11.20% | 9.95% |
| Tax rate | 22.50% - 22.60% | 22.55% |
| Cost of debt | 5.40% - 7.00% | 6.20% |
| WACC | 6.4% - 8.2% | 7.3% |
| Category | Low | High |
| Long-term bond rate | 3.0% | 3.5% |
| Equity market risk premium | 5.3% | 6.3% |
| Adjusted beta | 1.07 | 1.12 |
| Additional risk adjustments | 0.0% | 0.5% |
| Cost of equity | 8.70% | 11.20% |
| Tax rate | 22.50% | 22.60% |
| Debt/Equity ratio | 1.08 | 1.08 |
| Cost of debt | 5.40% | 7.00% |
| After-tax WACC | 6.4% | 8.2% |
| 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 1492.HK:
cost_of_equity (9.95%) = risk_free_rate (3.25%) + equity_risk_premium (5.80%) * adjusted_beta (1.07) + 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.