The WACC of China Dongxiang (Group) Co Ltd (3818.HK) is 10.3%.
| Range | Selected | |
| Cost of equity | 8.80% - 12.10% | 10.45% |
| Tax rate | 12.80% - 16.10% | 14.45% |
| Cost of debt | 5.00% - 5.00% | 5.00% |
| WACC | 8.7% - 12.0% | 10.3% |
| Category | Low | High |
| Long-term bond rate | 2.9% | 3.4% |
| Equity market risk premium | 6.0% | 7.0% |
| Adjusted beta | 0.99 | 1.18 |
| Additional risk adjustments | 0.0% | 0.5% |
| Cost of equity | 8.80% | 12.10% |
| Tax rate | 12.80% | 16.10% |
| Debt/Equity ratio | 0.02 | 0.02 |
| Cost of debt | 5.00% | 5.00% |
| After-tax WACC | 8.7% | 12.0% |
| Selected WACC | 10.3% | |
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 3818.HK:
cost_of_equity (10.45%) = risk_free_rate (3.15%) + equity_risk_premium (6.50%) * adjusted_beta (0.99) + 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.