2281.HK WACC - Weighted Average Cost of Capital

The WACC of Luzhou Xinglu Water Group Co Ltd (2281.HK) is 6.5%.

The Cost of Equity of Luzhou Xinglu Water Group Co Ltd (2281.HK) is 16.25%.

The Cost of Debt of Luzhou Xinglu Water Group Co Ltd (2281.HK) is 5.00%.

	Range	Selected
Cost of equity	13.30% - 19.20%	16.25%
Tax rate	14.50% - 14.90%	14.70%
Cost of debt	5.00% - 5.00%	5.00%
WACC	5.9% - 7.0%	6.5%

WACC

2281.HK WACC calculation

Category	Low	High

Long-term bond rate	2.9%	3.4%
Equity market risk premium	6.0%	7.0%
Adjusted beta	1.74	2.2

Additional risk adjustments	0.0%	0.5%
Cost of equity	13.30%	19.20%

Tax rate	14.50%	14.90%
Debt/Equity ratio	4.4	4.4
Cost of debt	5.00%	5.00%

After-tax WACC	5.9%	7.0%


Selected WACC	6.5%

2281.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 2281.HK:

cost_of_equity (16.25%) = risk_free_rate (3.15%) + equity_risk_premium (6.50%) * adjusted_beta (1.74) + 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.