The WACC of Earthasia International Holdings Ltd (6128.HK) is 5.7%.
Range | Selected | |
Cost of equity | 4.80% - 7.60% | 6.20% |
Tax rate | 2.90% - 4.50% | 3.70% |
Cost of debt | 4.10% - 7.00% | 5.55% |
WACC | 4.4% - 7.1% | 5.7% |
Category | Low | High |
Long-term bond rate | 2.9% | 3.4% |
Equity market risk premium | 6.0% | 7.0% |
Adjusted beta | 0.24 | 0.46 |
Additional risk adjustments | 0.5% | 1.0% |
Cost of equity | 4.80% | 7.60% |
Tax rate | 2.90% | 4.50% |
Debt/Equity ratio | 1.31 | 1.31 |
Cost of debt | 4.10% | 7.00% |
After-tax WACC | 4.4% | 7.1% |
Selected WACC | 5.7% | |
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 6128.HK:
cost_of_equity (6.20%) = risk_free_rate (3.15%) + equity_risk_premium (6.50%) * adjusted_beta (0.24) + risk_adjustments (0.75%)
We include the risk adjustments, which range from 0% to 1%, to keep our WACC conservatives, especially for companies traded in developing markets.