374.HK WACC - Weighted Average Cost of Capital

The WACC of Four Seas Mercantile Holdings Ltd (374.HK) is 5.6%.

The Cost of Equity of Four Seas Mercantile Holdings Ltd (374.HK) is 6.60%.

The Cost of Debt of Four Seas Mercantile Holdings Ltd (374.HK) is 9.30%.

	Range	Selected
Cost of equity	5.40% - 7.80%	6.60%
Tax rate	44.30% - 49.30%	46.80%
Cost of debt	4.00% - 14.60%	9.30%
WACC	3.5% - 7.6%	5.6%

WACC

374.HK WACC calculation

Category	Low	High

Long-term bond rate	2.9%	3.4%
Equity market risk premium	6.0%	7.0%
Adjusted beta	0.42	0.57

Additional risk adjustments	0.0%	0.5%
Cost of equity	5.40%	7.80%

Tax rate	44.30%	49.30%
Debt/Equity ratio	1.42	1.42
Cost of debt	4.00%	14.60%

After-tax WACC	3.5%	7.6%


Selected WACC	5.6%

374.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 374.HK:

cost_of_equity (6.60%) = risk_free_rate (3.15%) + equity_risk_premium (6.50%) * adjusted_beta (0.42) + 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.