604.HK WACC - Weighted Average Cost of Capital

The WACC of Shenzhen Investment Ltd (604.HK) is 8.4%.

The Cost of Equity of Shenzhen Investment Ltd (604.HK) is 18.05%.

The Cost of Debt of Shenzhen Investment Ltd (604.HK) is 9.30%.

	Range	Selected
Cost of equity	11.80% - 24.30%	18.05%
Tax rate	22.10% - 22.30%	22.20%
Cost of debt	4.00% - 14.60%	9.30%
WACC	4.0% - 12.7%	8.4%

WACC

604.HK WACC calculation

Category	Low	High

Long-term bond rate	2.9%	3.4%
Equity market risk premium	6.0%	7.0%
Adjusted beta	1.5	2.92

Additional risk adjustments	0.0%	0.5%
Cost of equity	11.80%	24.30%

Tax rate	22.10%	22.30%
Debt/Equity ratio	8.53	8.53
Cost of debt	4.00%	14.60%

After-tax WACC	4.0%	12.7%


Selected WACC	8.4%

604.HK'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 604.HK:

cost_of_equity (18.05%) = risk_free_rate (3.15%) + equity_risk_premium (6.50%) * adjusted_beta (1.5) + 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.