Category	Low	High

Long-term bond rate	2.7%	3.2%
Equity market risk premium	6.1%	7.1%
Adjusted beta	0.37	0.5

Additional risk adjustments	0.0%	0.5%
Cost of equity	4.9%	7.3%

Tax rate	33.8%	39.5%
Debt/Equity ratio	0.31	0.31
Cost of debt	5.0%	5.0%

After-tax WACC	4.5%	6.3%


Selected WACC	5.4%

600318.SS WACC - Detailed calculations of Beta

		Debt/Equity		Unlevered
Peers	Company Name	ratio	Beta	beta

600318.SS	Anhui Xinli Finance Co Ltd	0.31	2.21	1.83
000416.SZ	Minsheng Holdings Co Ltd	0.05	0.33	0.32
1290.HK	China Huirong Financial Holdings Ltd	1.67	-0.11	-0.05
1543.HK	Guangdong Join-Share Financing Guarantee Investment Co Ltd	1.83	0.47	0.21
1577.HK	Quanzhou Huixin Micro-credit Co Ltd	0	0.84	0.84
1915.HK	Yangzhou Guangling District Taihe Rural Micro-finance Co Ltd	0.01	-0.32	-0.32
2718.HK	Shanghai Dongzheng Automotive Finance Co Ltd	0.61	0.3	0.21
3963.HK	China Rongzhong Financial Holdings Company Ltd	0.04	0.66	0.65
600599.SS	Panda Financial Holding Corp Ltd	0.07	-0.26	-0.25
6866.HK	Zuoli Kechuang Micro-finance Co Ltd	1.57	0.23	0.11
8030.HK	Flying Financial Service Holdings Ltd	0	-0.31	-0.31

	Low	High

Unlevered beta	0.11	0.21
Relevered beta	0.06	0.25
Adjusted relevered beta	0.37	0.5

600318.SS'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 600318.SS:

cost_of_equity (6.10%) = risk_free_rate (2.95%) + equity_risk_premium (6.60%) * adjusted_beta (0.37) + 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.