600742.SS WACC - Weighted Average Cost of Capital

The WACC of Changchun Faway Automobile Components Co Ltd (600742.SS) is 10.1%.

The Cost of Equity of Changchun Faway Automobile Components Co Ltd (600742.SS) is 13.50%.

The Cost of Debt of Changchun Faway Automobile Components Co Ltd (600742.SS) is 5.00%.

	Range	Selected
Cost of equity	11.50% - 15.50%	13.50%
Tax rate	11.70% - 13.60%	12.65%
Cost of debt	5.00% - 5.00%	5.00%
WACC	8.8% - 11.3%	10.1%

WACC

600742.SS WACC calculation

Category	Low	High

Long-term bond rate	2.7%	3.2%
Equity market risk premium	6.1%	7.1%
Adjusted beta	1.45	1.66

Additional risk adjustments	0.0%	0.5%
Cost of equity	11.50%	15.50%

Tax rate	11.70%	13.60%
Debt/Equity ratio	0.61	0.61
Cost of debt	5.00%	5.00%

After-tax WACC	8.8%	11.3%


Selected WACC	10.1%

600742.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 600742.SS:

cost_of_equity (13.50%) = risk_free_rate (2.95%) + equity_risk_premium (6.60%) * adjusted_beta (1.45) + 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.