The WACC of Hainan Meilan International Airport Co Ltd (357.HK) is 7.2%.
| Range | Selected | |
| Cost of equity | 7.20% - 10.10% | 8.65% |
| Tax rate | 7.30% - 12.90% | 10.10% |
| Cost of debt | 4.00% - 7.00% | 5.50% |
| WACC | 5.8% - 8.5% | 7.2% |
| Category | Low | High |
| Long-term bond rate | 2.9% | 3.4% |
| Equity market risk premium | 6.0% | 7.0% |
| Adjusted beta | 0.73 | 0.89 |
| Additional risk adjustments | 0.0% | 0.5% |
| Cost of equity | 7.20% | 10.10% |
| Tax rate | 7.30% | 12.90% |
| Debt/Equity ratio | 0.67 | 0.67 |
| Cost of debt | 4.00% | 7.00% |
| After-tax WACC | 5.8% | 8.5% |
| Selected WACC | 7.2% | |
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 357.HK:
cost_of_equity (8.65%) = risk_free_rate (3.15%) + equity_risk_premium (6.50%) * adjusted_beta (0.73) + 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.