The WACC of Life Healthcare Group Ltd (928.HK) is 6.6%.
| Range | Selected | |
| Cost of equity | 5.40% - 7.90% | 6.65% |
| Tax rate | 2.70% - 16.70% | 9.70% |
| Cost of debt | 4.00% - 12.00% | 8.00% |
| WACC | 5.3% - 8.0% | 6.6% |
| Category | Low | High |
| Long-term bond rate | 2.9% | 3.4% |
| Equity market risk premium | 6.0% | 7.0% |
| Adjusted beta | 0.42 | 0.58 |
| Additional risk adjustments | 0.0% | 0.5% |
| Cost of equity | 5.40% | 7.90% |
| Tax rate | 2.70% | 16.70% |
| Debt/Equity ratio | 0.04 | 0.04 |
| Cost of debt | 4.00% | 12.00% |
| After-tax WACC | 5.3% | 8.0% |
| Selected WACC | 6.6% | |
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 928.HK:
cost_of_equity (6.65%) = risk_free_rate (3.15%) + equity_risk_premium (6.50%) * 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.