The WACC of Zhongxing Tianheng Energy Technology Beijing Co Ltd (600856.SS) is 6.4%.
| Range | Selected | |
| Cost of equity | 25.70% - 49.50% | 37.60% |
| Tax rate | 3.30% - 7.30% | 5.30% |
| Cost of debt | 5.00% - 5.00% | 5.00% |
| WACC | 5.9% - 6.9% | 6.4% |
| Category | Low | High |
| Long-term bond rate | 2.8% | 3.3% |
| Equity market risk premium | 5.4% | 6.4% |
| Adjusted beta | 4.21 | 7.1 |
| Additional risk adjustments | 0.0% | 0.5% |
| Cost of equity | 25.70% | 49.50% |
| Tax rate | 3.30% | 7.30% |
| Debt/Equity ratio | 18.61 | 18.61 |
| Cost of debt | 5.00% | 5.00% |
| After-tax WACC | 5.9% | 6.9% |
| Selected WACC | 6.4% | |
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 600856.SS:
cost_of_equity (37.60%) = risk_free_rate (3.05%) + equity_risk_premium (5.90%) * adjusted_beta (4.21) + 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.