590.HK WACC - Weighted Average Cost of Capital

The WACC of Luk Fook Holdings International Ltd (590.HK) is 7.1%.

The Cost of Equity of Luk Fook Holdings International Ltd (590.HK) is 7.75%.

The Cost of Debt of Luk Fook Holdings International Ltd (590.HK) is 4.25%.

	Range	Selected
Cost of equity	5.80% - 9.70%	7.75%
Tax rate	17.70% - 18.30%	18.00%
Cost of debt	4.00% - 4.50%	4.25%
WACC	5.4% - 8.8%	7.1%

WACC

590.HK WACC calculation

Category	Low	High

Long-term bond rate	2.9%	3.4%
Equity market risk premium	6.0%	7.0%
Adjusted beta	0.49	0.84

Additional risk adjustments	0.0%	0.5%
Cost of equity	5.80%	9.70%

Tax rate	17.70%	18.30%
Debt/Equity ratio	0.18	0.18
Cost of debt	4.00%	4.50%

After-tax WACC	5.4%	8.8%


Selected WACC	7.1%

590.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 590.HK:

cost_of_equity (7.75%) = risk_free_rate (3.15%) + equity_risk_premium (6.50%) * adjusted_beta (0.49) + 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.