The WACC of Shanghai Greencourt Investment Group Co Ltd (600695.SS) is 8.8%.
| Range | Selected | |
| Cost of equity | 7.20% - 12.10% | 9.65% |
| Tax rate | 21.20% - 34.70% | 27.95% |
| Cost of debt | 5.00% - 5.00% | 5.00% |
| WACC | 6.7% - 10.9% | 8.8% |
| Category | Low | High |
| Long-term bond rate | 2.8% | 3.3% |
| Equity market risk premium | 5.4% | 6.4% |
| Adjusted beta | 0.8 | 1.29 |
| Additional risk adjustments | 0.0% | 0.5% |
| Cost of equity | 7.20% | 12.10% |
| Tax rate | 21.20% | 34.70% |
| Debt/Equity ratio | 0.16 | 0.16 |
| Cost of debt | 5.00% | 5.00% |
| After-tax WACC | 6.7% | 10.9% |
| Selected WACC | 8.8% | |
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 600695.SS:
cost_of_equity (9.65%) = risk_free_rate (3.05%) + equity_risk_premium (5.90%) * adjusted_beta (0.8) + 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.