The WACC of Jiahua Stores Holdings Ltd (602.HK) is 15.8%.
Range | Selected | |
Cost of equity | 19.70% - 37.50% | 28.60% |
Tax rate | 0.70% - 1.50% | 1.10% |
Cost of debt | 7.40% - 22.90% | 15.15% |
WACC | 8.1% - 23.4% | 15.8% |
Category | Low | High |
Long-term bond rate | 2.9% | 3.4% |
Equity market risk premium | 6.0% | 7.0% |
Adjusted beta | 2.82 | 4.81 |
Additional risk adjustments | 0.0% | 0.5% |
Cost of equity | 19.70% | 37.50% |
Tax rate | 0.70% | 1.50% |
Debt/Equity ratio | 15.4 | 15.4 |
Cost of debt | 7.40% | 22.90% |
After-tax WACC | 8.1% | 23.4% |
Selected WACC | 15.8% | |
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 602.HK:
cost_of_equity (28.60%) = risk_free_rate (3.15%) + equity_risk_premium (6.50%) * adjusted_beta (2.82) + 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.