The WACC of Luye Pharma Group Ltd (2186.HK) is 8.6%.
Range | Selected | |
Cost of equity | 10.40% - 15.00% | 12.70% |
Tax rate | 23.10% - 24.00% | 23.55% |
Cost of debt | 4.20% - 6.00% | 5.10% |
WACC | 7.1% - 10.2% | 8.6% |
Category | Low | High |
Long-term bond rate | 2.9% | 3.4% |
Equity market risk premium | 6.0% | 7.0% |
Adjusted beta | 1.26 | 1.6 |
Additional risk adjustments | 0.0% | 0.5% |
Cost of equity | 10.40% | 15.00% |
Tax rate | 23.10% | 24.00% |
Debt/Equity ratio | 0.87 | 0.87 |
Cost of debt | 4.20% | 6.00% |
After-tax WACC | 7.1% | 10.2% |
Selected WACC | 8.6% | |
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 2186.HK:
cost_of_equity (12.70%) = risk_free_rate (3.15%) + equity_risk_premium (6.50%) * adjusted_beta (1.26) + 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.