The WACC of Royal Deluxe Holdings Ltd (3789.HK) is 5.7%.
| Range | Selected | |
| Cost of equity | 5.00% - 6.40% | 5.70% |
| Tax rate | 19.10% - 22.70% | 20.90% |
| Cost of debt | 5.10% - 5.40% | 5.25% |
| WACC | 5.0% - 6.4% | 5.7% |
| Category | Low | High |
| Long-term bond rate | 2.9% | 3.4% |
| Equity market risk premium | 6.0% | 7.0% |
| Adjusted beta | 0.27 | 0.3 |
| Additional risk adjustments | 0.5% | 1.0% |
| Cost of equity | 5.00% | 6.40% |
| Tax rate | 19.10% | 22.70% |
| Debt/Equity ratio | 0.01 | 0.01 |
| Cost of debt | 5.10% | 5.40% |
| After-tax WACC | 5.0% | 6.4% |
| Selected WACC | 5.7% | |
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 3789.HK:
cost_of_equity (5.70%) = risk_free_rate (3.15%) + equity_risk_premium (6.50%) * adjusted_beta (0.27) + risk_adjustments (0.75%)
We include the risk adjustments, which range from 0% to 1%, to keep our WACC conservatives, especially for companies traded in developing markets.