1728.HK WACC - Weighted Average Cost of Capital

The WACC of China ZhengTong Auto Services Holdings Ltd (1728.HK) is 7.9%.

The Cost of Equity of China ZhengTong Auto Services Holdings Ltd (1728.HK) is 36.90%.

The Cost of Debt of China ZhengTong Auto Services Holdings Ltd (1728.HK) is 6.75%.

	Range	Selected
Cost of equity	23.50% - 50.30%	36.90%
Tax rate	5.70% - 11.30%	8.50%
Cost of debt	6.50% - 7.00%	6.75%
WACC	7.1% - 8.7%	7.9%

WACC

1728.HK WACC calculation

Category	Low	High

Long-term bond rate	2.9%	3.4%
Equity market risk premium	6.0%	7.0%
Adjusted beta	3.44	6.66

Additional risk adjustments	0.0%	0.5%
Cost of equity	23.50%	50.30%

Tax rate	5.70%	11.30%
Debt/Equity ratio	16.87	16.87
Cost of debt	6.50%	7.00%

After-tax WACC	7.1%	8.7%


Selected WACC	7.9%

1728.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 1728.HK:

cost_of_equity (36.90%) = risk_free_rate (3.15%) + equity_risk_premium (6.50%) * adjusted_beta (3.44) + 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.