The WACC of Yuxing Infotech Investment Holdings Ltd (8005.HK) is 6.3%.
| Range | Selected | |
| Cost of equity | 5.20% - 7.50% | 6.35% |
| Tax rate | 9.40% - 11.10% | 10.25% |
| Cost of debt | 7.00% - 7.00% | 7.00% |
| WACC | 5.3% - 7.3% | 6.3% |
| Category | Low | High |
| Long-term bond rate | 2.9% | 3.4% |
| Equity market risk premium | 6.0% | 7.0% |
| Adjusted beta | 0.22 | 0.37 |
| Additional risk adjustments | 1.0% | 1.5% |
| Cost of equity | 5.20% | 7.50% |
| Tax rate | 9.40% | 11.10% |
| Debt/Equity ratio | 0.19 | 0.19 |
| Cost of debt | 7.00% | 7.00% |
| After-tax WACC | 5.3% | 7.3% |
| Selected WACC | 6.3% | |
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 8005.HK:
cost_of_equity (6.35%) = risk_free_rate (3.15%) + equity_risk_premium (6.50%) * adjusted_beta (0.22) + risk_adjustments (1.25%)
We include the risk adjustments, which range from 0% to 1%, to keep our WACC conservatives, especially for companies traded in developing markets.