196.HK WACC - Weighted Average Cost of Capital

The WACC of Honghua Group Ltd (196.HK) is 13.7%.

The Cost of Equity of Honghua Group Ltd (196.HK) is 19.40%.

The Cost of Debt of Honghua Group Ltd (196.HK) is 13.80%.

	Range	Selected
Cost of equity	13.00% - 25.80%	19.40%
Tax rate	1.80% - 13.30%	7.55%
Cost of debt	4.70% - 22.90%	13.80%
WACC	6.4% - 21.1%	13.7%

WACC

196.HK WACC calculation

Category	Low	High

Long-term bond rate	2.9%	3.4%
Equity market risk premium	6.0%	7.0%
Adjusted beta	1.7	3.14

Additional risk adjustments	0.0%	0.5%
Cost of equity	13.00%	25.80%

Tax rate	1.80%	13.30%
Debt/Equity ratio	3.72	3.72
Cost of debt	4.70%	22.90%

After-tax WACC	6.4%	21.1%


Selected WACC	13.7%

196.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 196.HK:

cost_of_equity (19.40%) = risk_free_rate (3.15%) + equity_risk_premium (6.50%) * adjusted_beta (1.7) + 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.