420.HK WACC - Weighted Average Cost of Capital

The WACC of Fountain Set Holdings Ltd (420.HK) is 6.7%.

The Cost of Equity of Fountain Set Holdings Ltd (420.HK) is 7.65%.

The Cost of Debt of Fountain Set Holdings Ltd (420.HK) is 4.45%.

	Range	Selected
Cost of equity	5.90% - 9.40%	7.65%
Tax rate	31.30% - 45.40%	38.35%
Cost of debt	4.00% - 4.90%	4.45%
WACC	5.3% - 8.1%	6.7%

WACC

420.HK WACC calculation

Category	Low	High

Long-term bond rate	2.9%	3.4%
Equity market risk premium	6.0%	7.0%
Adjusted beta	0.51	0.79

Additional risk adjustments	0.0%	0.5%
Cost of equity	5.90%	9.40%

Tax rate	31.30%	45.40%
Debt/Equity ratio	0.23	0.23
Cost of debt	4.00%	4.90%

After-tax WACC	5.3%	8.1%


Selected WACC	6.7%

420.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 420.HK:

cost_of_equity (7.65%) = risk_free_rate (3.15%) + equity_risk_premium (6.50%) * adjusted_beta (0.51) + 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.