406.HK WACC - Weighted Average Cost of Capital

The WACC of Yau Lee Holdings Ltd (406.HK) is 8.6%.

The Cost of Equity of Yau Lee Holdings Ltd (406.HK) is 6.45%.

The Cost of Debt of Yau Lee Holdings Ltd (406.HK) is 11.95%.

	Range	Selected
Cost of equity	5.20% - 7.70%	6.45%
Tax rate	23.40% - 25.80%	24.60%
Cost of debt	4.00% - 19.90%	11.95%
WACC	3.3% - 14.0%	8.6%

WACC

406.HK WACC calculation

Category	Low	High

Long-term bond rate	2.9%	3.4%
Equity market risk premium	6.0%	7.0%
Adjusted beta	0.39	0.56

Additional risk adjustments	0.0%	0.5%
Cost of equity	5.20%	7.70%

Tax rate	23.40%	25.80%
Debt/Equity ratio	8.27	8.27
Cost of debt	4.00%	19.90%

After-tax WACC	3.3%	14.0%


Selected WACC	8.6%

406.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 406.HK:

cost_of_equity (6.45%) = risk_free_rate (3.15%) + equity_risk_premium (6.50%) * adjusted_beta (0.39) + 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.