The WACC of China Life Insurance Company Ltd (2823.TW) is 6.5%.
| Range | Selected | |
| Cost of equity | 5.20% - 8.20% | 6.70% |
| Tax rate | 5.20% - 6.30% | 5.75% |
| Cost of debt | 5.00% - 5.00% | 5.00% |
| WACC | 5.2% - 7.9% | 6.5% |
| Category | Low | High |
| Long-term bond rate | 1.8% | 2.3% |
| Equity market risk premium | 5.3% | 6.3% |
| Adjusted beta | 0.64 | 0.85 |
| Additional risk adjustments | 0.0% | 0.5% |
| Cost of equity | 5.20% | 8.20% |
| Tax rate | 5.20% | 6.30% |
| Debt/Equity ratio | 0.09 | 0.09 |
| Cost of debt | 5.00% | 5.00% |
| After-tax WACC | 5.2% | 7.9% |
| Selected WACC | 6.5% | |
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 2823.TW:
cost_of_equity (6.70%) = risk_free_rate (2.05%) + equity_risk_premium (5.80%) * adjusted_beta (0.64) + 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.