The WACC of Shanghai Lingyun Industries Development Co Ltd (900957.SS) is 6.4%.
| Range | Selected | |
| Cost of equity | 7.90% - 10.80% | 9.35% |
| Tax rate | 11.70% - 13.50% | 12.60% |
| Cost of debt | 5.00% - 5.00% | 5.00% |
| WACC | 5.8% - 6.9% | 6.4% |
| Category | Low | High |
| Long-term bond rate | 2.2% | 2.7% |
| Equity market risk premium | 5.6% | 6.6% |
| Adjusted beta | 1.02 | 1.15 |
| Additional risk adjustments | 0.0% | 0.5% |
| Cost of equity | 7.90% | 10.80% |
| Tax rate | 11.70% | 13.50% |
| Debt/Equity ratio | 1.49 | 1.49 |
| Cost of debt | 5.00% | 5.00% |
| After-tax WACC | 5.8% | 6.9% |
| Selected WACC | 6.4% | |
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 900957.SS:
cost_of_equity (9.35%) = risk_free_rate (2.45%) + equity_risk_premium (6.10%) * adjusted_beta (1.02) + 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.