The WACC of Modern Chinese Medicine Group Co Ltd (1643.HK) is 8.7%.
| Range | Selected | |
| Cost of equity | 6.90% - 10.60% | 8.75% |
| Tax rate | 29.00% - 29.50% | 29.25% |
| Cost of debt | 4.00% - 8.10% | 6.05% |
| WACC | 6.9% - 10.6% | 8.7% |
| Category | Low | High |
| Long-term bond rate | 2.9% | 3.4% |
| Equity market risk premium | 6.0% | 7.0% |
| Adjusted beta | 0.67 | 0.96 |
| Additional risk adjustments | 0.0% | 0.5% |
| Cost of equity | 6.90% | 10.60% |
| Tax rate | 29.00% | 29.50% |
| Debt/Equity ratio | 0 | 0 |
| Cost of debt | 4.00% | 8.10% |
| After-tax WACC | 6.9% | 10.6% |
| Selected WACC | 8.7% | |
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 1643.HK:
cost_of_equity (8.75%) = risk_free_rate (3.15%) + equity_risk_premium (6.50%) * adjusted_beta (0.67) + 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.