The WACC of Narnia (Hong Kong) Group Co Ltd (8607.HK) is 8.3%.
| Range | Selected | |
| Cost of equity | 11.00% - 16.40% | 13.70% |
| Tax rate | 9.50% - 14.40% | 11.95% |
| Cost of debt | 5.20% - 7.00% | 6.10% |
| WACC | 7.0% - 9.7% | 8.3% |
| Category | Low | High |
| Long-term bond rate | 2.9% | 3.4% |
| Equity market risk premium | 6.0% | 7.0% |
| Adjusted beta | 1.36 | 1.79 |
| Additional risk adjustments | 0.0% | 0.5% |
| Cost of equity | 11.00% | 16.40% |
| Tax rate | 9.50% | 14.40% |
| Debt/Equity ratio | 1.81 | 1.81 |
| Cost of debt | 5.20% | 7.00% |
| After-tax WACC | 7.0% | 9.7% |
| Selected WACC | 8.3% | |
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 8607.HK:
cost_of_equity (13.70%) = risk_free_rate (3.15%) + equity_risk_premium (6.50%) * adjusted_beta (1.36) + 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.