The WACC of Shanghai Huili Building Materials Co Ltd (900939.SS) is 5.7%.
| Range | Selected | |
| Cost of equity | 4.50% - 7.00% | 5.75% |
| Tax rate | 29.00% - 29.90% | 29.45% |
| Cost of debt | 5.00% - 5.00% | 5.00% |
| WACC | 4.5% - 7.0% | 5.7% |
| Category | Low | High |
| Long-term bond rate | 2.2% | 2.7% |
| Equity market risk premium | 5.6% | 6.6% |
| Adjusted beta | 0.42 | 0.57 |
| Additional risk adjustments | 0.0% | 0.5% |
| Cost of equity | 4.50% | 7.00% |
| Tax rate | 29.00% | 29.90% |
| Debt/Equity ratio | 0 | 0 |
| Cost of debt | 5.00% | 5.00% |
| After-tax WACC | 4.5% | 7.0% |
| Selected WACC | 5.7% | |
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 900939.SS:
cost_of_equity (5.75%) = risk_free_rate (2.45%) + equity_risk_premium (6.10%) * adjusted_beta (0.42) + 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.