1721.HK WACC - Weighted Average Cost of Capital

The WACC of FSM Holdings Ltd (1721.HK) is 5.3%.

The Cost of Equity of FSM Holdings Ltd (1721.HK) is 5.40%.

The Cost of Debt of FSM Holdings Ltd (1721.HK) is 5.50%.

	Range	Selected
Cost of equity	4.10% - 6.70%	5.40%
Tax rate	17.80% - 20.30%	19.05%
Cost of debt	4.00% - 7.00%	5.50%
WACC	4.0% - 6.5%	5.3%

WACC

1721.HK WACC calculation

Category	Low	High

Long-term bond rate	2.9%	3.4%
Equity market risk premium	6.0%	7.0%
Adjusted beta	0.21	0.41

Additional risk adjustments	0.0%	0.5%
Cost of equity	4.10%	6.70%

Tax rate	17.80%	20.30%
Debt/Equity ratio	0.21	0.21
Cost of debt	4.00%	7.00%

After-tax WACC	4.0%	6.5%


Selected WACC	5.3%

1721.HK's CAPM model and how its cost of Equity is calculated

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 1721.HK:

cost_of_equity (5.40%) = risk_free_rate (3.15%) + equity_risk_premium (6.50%) * adjusted_beta (0.21) + 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.