The WACC of Yunnan Water Investment Company Ltd (6839.HK) is 4.9%.
Range | Selected | |
Cost of equity | 25.40% - 42.00% | 33.70% |
Tax rate | 11.70% - 19.60% | 15.65% |
Cost of debt | 4.30% - 7.00% | 5.65% |
WACC | 4.0% - 5.9% | 4.9% |
Category | Low | High |
Long-term bond rate | 2.9% | 3.4% |
Equity market risk premium | 6.0% | 7.0% |
Adjusted beta | 3.77 | 5.46 |
Additional risk adjustments | 0.0% | 0.5% |
Cost of equity | 25.40% | 42.00% |
Tax rate | 11.70% | 19.60% |
Debt/Equity ratio | 140.71 | 140.71 |
Cost of debt | 4.30% | 7.00% |
After-tax WACC | 4.0% | 5.9% |
Selected WACC | 4.9% | |
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 6839.HK:
cost_of_equity (33.70%) = risk_free_rate (3.15%) + equity_risk_premium (6.50%) * adjusted_beta (3.77) + 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.