The WACC of China 21st Century Education Group Ltd (1598.HK) is 11.3%.
Range | Selected | |
Cost of equity | 13.50% - 42.60% | 28.05% |
Tax rate | 1.50% - 1.90% | 1.70% |
Cost of debt | 7.40% - 11.40% | 9.40% |
WACC | 8.0% - 14.6% | 11.3% |
Category | Low | High |
Long-term bond rate | 2.9% | 3.4% |
Equity market risk premium | 6.0% | 7.0% |
Adjusted beta | 1.77 | 5.55 |
Additional risk adjustments | 0.0% | 0.5% |
Cost of equity | 13.50% | 42.60% |
Tax rate | 1.50% | 1.90% |
Debt/Equity ratio | 8.08 | 8.08 |
Cost of debt | 7.40% | 11.40% |
After-tax WACC | 8.0% | 14.6% |
Selected WACC | 11.3% | |
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 1598.HK:
cost_of_equity (28.05%) = risk_free_rate (3.15%) + equity_risk_premium (6.50%) * adjusted_beta (1.77) + 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.