The WACC of Xinyuan Property Management Service (Cayman) Ltd (1895.HK) is 8.4%.
| Range | Selected | |
| Cost of equity | 7.40% - 10.70% | 9.05% |
| Tax rate | 22.50% - 30.20% | 26.35% |
| Cost of debt | 5.00% - 5.00% | 5.00% |
| WACC | 6.9% - 9.8% | 8.4% |
| Category | Low | High |
| Long-term bond rate | 2.9% | 3.4% |
| Equity market risk premium | 6.0% | 7.0% |
| Adjusted beta | 0.76 | 0.98 |
| Additional risk adjustments | 0.0% | 0.5% |
| Cost of equity | 7.40% | 10.70% |
| Tax rate | 22.50% | 30.20% |
| Debt/Equity ratio | 0.15 | 0.15 |
| Cost of debt | 5.00% | 5.00% |
| After-tax WACC | 6.9% | 9.8% |
| Selected WACC | 8.4% | |
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 1895.HK:
cost_of_equity (9.05%) = risk_free_rate (3.15%) + equity_risk_premium (6.50%) * adjusted_beta (0.76) + 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.