737.HK WACC - Weighted Average Cost of Capital

The WACC of Shenzhen Investment Holdings Bay Area Development Co Ltd (737.HK) is 6.1%.

The Cost of Equity of Shenzhen Investment Holdings Bay Area Development Co Ltd (737.HK) is 8.40%.

The Cost of Debt of Shenzhen Investment Holdings Bay Area Development Co Ltd (737.HK) is 4.25%.

	Range	Selected
Cost of equity	6.20% - 10.60%	8.40%
Tax rate	16.90% - 18.20%	17.55%
Cost of debt	4.00% - 4.50%	4.25%
WACC	4.8% - 7.3%	6.1%

WACC

737.HK WACC calculation

Category	Low	High

Long-term bond rate	2.9%	3.4%
Equity market risk premium	6.0%	7.0%
Adjusted beta	0.56	0.96

Additional risk adjustments	0.0%	0.5%
Cost of equity	6.20%	10.60%

Tax rate	16.90%	18.20%
Debt/Equity ratio	0.89	0.89
Cost of debt	4.00%	4.50%

After-tax WACC	4.8%	7.3%


Selected WACC	6.1%

737.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 737.HK:

cost_of_equity (8.40%) = risk_free_rate (3.15%) + equity_risk_premium (6.50%) * adjusted_beta (0.56) + 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.