The WACC of China SCE Group Holdings Ltd (1966.HK) is 4.5%.
Range | Selected | |
Cost of equity | 11.40% - 32.10% | 21.75% |
Tax rate | 24.70% - 33.80% | 29.25% |
Cost of debt | 5.10% - 7.00% | 6.05% |
WACC | 3.9% - 5.0% | 4.5% |
Category | Low | High |
Long-term bond rate | 2.9% | 3.4% |
Equity market risk premium | 6.0% | 7.0% |
Adjusted beta | 1.42 | 4.05 |
Additional risk adjustments | 0.0% | 0.5% |
Cost of equity | 11.40% | 32.10% |
Tax rate | 24.70% | 33.80% |
Debt/Equity ratio | 78.55 | 78.55 |
Cost of debt | 5.10% | 7.00% |
After-tax WACC | 3.9% | 5.0% |
Selected WACC | 4.5% | |
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 1966.HK:
cost_of_equity (21.75%) = risk_free_rate (3.15%) + equity_risk_premium (6.50%) * adjusted_beta (1.42) + 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.