The WACC of Prosperity Real Estate Investment Trust (808.HK) is 5.9%.
| Range | Selected | |
| Cost of equity | 6.60% - 9.40% | 8.00% |
| Tax rate | 22.10% - 22.30% | 22.20% |
| Cost of debt | 4.00% - 6.00% | 5.00% |
| WACC | 4.8% - 6.9% | 5.9% |
| Category | Low | High |
| Long-term bond rate | 2.9% | 3.4% |
| Equity market risk premium | 6.0% | 7.0% |
| Adjusted beta | 0.63 | 0.79 |
| Additional risk adjustments | 0.0% | 0.5% |
| Cost of equity | 6.60% | 9.40% |
| Tax rate | 22.10% | 22.30% |
| Debt/Equity ratio | 1.1 | 1.1 |
| Cost of debt | 4.00% | 6.00% |
| After-tax WACC | 4.8% | 6.9% |
| 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 808.HK:
cost_of_equity (8.00%) = risk_free_rate (3.15%) + equity_risk_premium (6.50%) * adjusted_beta (0.63) + 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.