37.HK WACC - Weighted Average Cost of Capital

The WACC of Far East Hotels and Entertainment Ltd (37.HK) is 6.7%.

The Cost of Equity of Far East Hotels and Entertainment Ltd (37.HK) is 6.30%.

The Cost of Debt of Far East Hotels and Entertainment Ltd (37.HK) is 13.45%.

	Range	Selected
Cost of equity	5.00% - 7.60%	6.30%
Tax rate	2.20% - 2.90%	2.55%
Cost of debt	4.00% - 22.90%	13.45%
WACC	5.0% - 8.5%	6.7%

WACC

37.HK WACC calculation

Category	Low	High

Long-term bond rate	2.9%	3.4%
Equity market risk premium	6.0%	7.0%
Adjusted beta	0.36	0.54

Additional risk adjustments	0.0%	0.5%
Cost of equity	5.00%	7.60%

Tax rate	2.20%	2.90%
Debt/Equity ratio	0.06	0.06
Cost of debt	4.00%	22.90%

After-tax WACC	5.0%	8.5%


Selected WACC	6.7%

37.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 37.HK:

cost_of_equity (6.30%) = risk_free_rate (3.15%) + equity_risk_premium (6.50%) * adjusted_beta (0.36) + 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.