600438.SS WACC - Weighted Average Cost of Capital
The WACC of Tongwei Co Ltd (600438.SS) is 7.3%.
| Range | Selected | |
| Cost of equity | 9.7% - 12.5% | 11.1% |
| Tax rate | 14.6% - 15.8% | 15.2% |
| Cost of debt | 5.0% - 5.0% | 5% |
| WACC | 6.7% - 7.9% | 7.3% |
| Category | Low | High |
| Long-term bond rate | 2.7% | 3.2% |
| Equity market risk premium | 6.1% | 7.1% |
| Adjusted beta | 1.14 | 1.23 |
| Additional risk adjustments | 0.0% | 0.5% |
| Cost of equity | 9.7% | 12.5% |
| Tax rate | 14.6% | 15.8% |
| Debt/Equity ratio | 1.24 | 1.24 |
| Cost of debt | 5.0% | 5.0% |
| After-tax WACC | 6.7% | 7.9% |
| Selected WACC | 7.3% | |
| Low | High | |
| Unlevered beta | 0.59 | 0.66 |
| Relevered beta | 1.21 | 1.34 |
| Adjusted relevered beta | 1.14 | 1.23 |
600438.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 600438.SS:
cost_of_equity (11.10%) = risk_free_rate (2.95%) + equity_risk_premium (6.60%) * adjusted_beta (1.14) + 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.