The WACC of Future Bright Holdings Ltd (703.HK) is 7.7%.
| Range | Selected | |
| Cost of equity | 17.00% - 25.10% | 21.05% |
| Tax rate | 9.00% - 12.10% | 10.55% |
| Cost of debt | 4.00% - 8.10% | 6.05% |
| WACC | 5.6% - 9.7% | 7.7% |
| Category | Low | High |
| Long-term bond rate | 2.9% | 3.4% |
| Equity market risk premium | 6.0% | 7.0% |
| Adjusted beta | 2.36 | 3.04 |
| Additional risk adjustments | 0.0% | 0.5% |
| Cost of equity | 17.00% | 25.10% |
| Tax rate | 9.00% | 12.10% |
| Debt/Equity ratio | 5.9 | 5.9 |
| Cost of debt | 4.00% | 8.10% |
| After-tax WACC | 5.6% | 9.7% |
| Selected WACC | 7.7% | |
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 703.HK:
cost_of_equity (21.05%) = risk_free_rate (3.15%) + equity_risk_premium (6.50%) * adjusted_beta (2.36) + 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.