6908.HK WACC - Weighted Average Cost of Capital

The WACC of Hongguang Lighting Holdings Company Ltd (6908.HK) is 8.9%.

The Cost of Equity of Hongguang Lighting Holdings Company Ltd (6908.HK) is 8.80%.

The Cost of Debt of Hongguang Lighting Holdings Company Ltd (6908.HK) is 11.15%.

	Range	Selected
Cost of equity	7.70% - 9.90%	8.80%
Tax rate	1.20% - 2.10%	1.65%
Cost of debt	7.00% - 15.30%	11.15%
WACC	7.7% - 10.1%	8.9%

WACC

6908.HK WACC calculation

Category	Low	High

Long-term bond rate	2.9%	3.4%
Equity market risk premium	6.0%	7.0%
Adjusted beta	0.81	0.86

Additional risk adjustments	0.0%	0.5%
Cost of equity	7.70%	9.90%

Tax rate	1.20%	2.10%
Debt/Equity ratio	0.04	0.04
Cost of debt	7.00%	15.30%

After-tax WACC	7.7%	10.1%


Selected WACC	8.9%

6908.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 6908.HK:

cost_of_equity (8.80%) = risk_free_rate (3.15%) + equity_risk_premium (6.50%) * adjusted_beta (0.81) + 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.