The WACC of Eternity Investment Ltd (764.HK) is 5.9%.
| Range | Selected | |
| Cost of equity | 5.00% - 9.80% | 7.40% |
| Tax rate | 8.10% - 9.00% | 8.55% |
| Cost of debt | 5.50% - 7.00% | 6.25% |
| WACC | 5.1% - 6.6% | 5.9% |
| Category | Low | High |
| Long-term bond rate | 2.9% | 3.4% |
| Equity market risk premium | 6.0% | 7.0% |
| Adjusted beta | -0.06 | 0.49 |
| Additional risk adjustments | 2.5% | 3.0% |
| Cost of equity | 5.00% | 9.80% |
| Tax rate | 8.10% | 9.00% |
| Debt/Equity ratio | 11.93 | 11.93 |
| Cost of debt | 5.50% | 7.00% |
| After-tax WACC | 5.1% | 6.6% |
| Selected WACC | 5.9% | |
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 764.HK:
cost_of_equity (7.40%) = risk_free_rate (3.15%) + equity_risk_premium (6.50%) * adjusted_beta (-0.06) + risk_adjustments (2.75%)
We include the risk adjustments, which range from 0% to 1%, to keep our WACC conservatives, especially for companies traded in developing markets.