The WACC of China Eco-Farming Ltd (8166.HK) is 8.5%.
| Range | Selected | |
| Cost of equity | 5.30% - 10.00% | 7.65% |
| Tax rate | 1.50% - 3.50% | 2.50% |
| Cost of debt | 7.00% - 10.60% | 8.80% |
| WACC | 6.7% - 10.2% | 8.5% |
| Category | Low | High |
| Long-term bond rate | 2.9% | 3.4% |
| Equity market risk premium | 6.0% | 7.0% |
| Adjusted beta | -0.01 | 0.52 |
| Additional risk adjustments | 2.5% | 3.0% |
| Cost of equity | 5.30% | 10.00% |
| Tax rate | 1.50% | 3.50% |
| Debt/Equity ratio | 8.85 | 8.85 |
| Cost of debt | 7.00% | 10.60% |
| After-tax WACC | 6.7% | 10.2% |
| Selected WACC | 8.5% | |
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 8166.HK:
cost_of_equity (7.65%) = risk_free_rate (3.15%) + equity_risk_premium (6.50%) * adjusted_beta (-0.01) + 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.