The WACC of Jiangsu Dewei Advanced Materials Co Ltd (300325.SZ) is 6.2%.
| Range | Selected | |
| Cost of equity | 18.30% - 23.40% | 20.85% |
| Tax rate | 10.20% - 14.00% | 12.10% |
| Cost of debt | 5.00% - 5.00% | 5.00% |
| WACC | 6.0% - 6.4% | 6.2% |
| Category | Low | High |
| Long-term bond rate | 2.8% | 3.3% |
| Equity market risk premium | 5.4% | 6.4% |
| Adjusted beta | 2.84 | 3.04 |
| Additional risk adjustments | 0.0% | 0.5% |
| Cost of equity | 18.30% | 23.40% |
| Tax rate | 10.20% | 14.00% |
| Debt/Equity ratio | 8.14 | 8.14 |
| Cost of debt | 5.00% | 5.00% |
| After-tax WACC | 6.0% | 6.4% |
| Selected WACC | 6.2% | |
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 300325.SZ:
cost_of_equity (20.85%) = risk_free_rate (3.05%) + equity_risk_premium (5.90%) * adjusted_beta (2.84) + 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.