The WACC of East Asia Holdings Investment Ltd (900110.KQ) is 5.4%.
| Range | Selected | |
| Cost of equity | 5.90% - 10.20% | 8.05% |
| Tax rate | 44.60% - 46.70% | 45.65% |
| Cost of debt | 5.00% - 5.00% | 5.00% |
| WACC | 4.3% - 6.4% | 5.4% |
| Category | Low | High |
| Long-term bond rate | 2.9% | 3.4% |
| Equity market risk premium | 6.0% | 7.0% |
| Adjusted beta | 0.5 | 0.9 |
| Additional risk adjustments | 0.0% | 0.5% |
| Cost of equity | 5.90% | 10.20% |
| Tax rate | 44.60% | 46.70% |
| Debt/Equity ratio | 1 | 1 |
| Cost of debt | 5.00% | 5.00% |
| After-tax WACC | 4.3% | 6.4% |
| Selected WACC | 5.4% | |
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 900110.KQ:
cost_of_equity (8.05%) = risk_free_rate (3.15%) + equity_risk_premium (6.50%) * adjusted_beta (0.5) + 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.