227.HK WACC - Weighted Average Cost of Capital

The WACC of First Shanghai Investments Ltd (227.HK) is 7.0%.

The Cost of Equity of First Shanghai Investments Ltd (227.HK) is 7.25%.

The Cost of Debt of First Shanghai Investments Ltd (227.HK) is 7.45%.

	Range	Selected
Cost of equity	6.10% - 8.40%	7.25%
Tax rate	14.30% - 38.00%	26.15%
Cost of debt	7.00% - 7.90%	7.45%
WACC	6.1% - 7.9%	7.0%

WACC

227.HK WACC calculation

Category	Low	High

Long-term bond rate	2.9%	3.4%
Equity market risk premium	6.0%	7.0%
Adjusted beta	0.54	0.65

Additional risk adjustments	0.0%	0.5%
Cost of equity	6.10%	8.40%

Tax rate	14.30%	38.00%
Debt/Equity ratio	0.17	0.17
Cost of debt	7.00%	7.90%

After-tax WACC	6.1%	7.9%


Selected WACC	7.0%

227.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 227.HK:

cost_of_equity (7.25%) = risk_free_rate (3.15%) + equity_risk_premium (6.50%) * adjusted_beta (0.54) + 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.