The WACC of Zhongzheng International Co Ltd (943.HK) is 4.4%.
| Range | Selected | |
| Cost of equity | 5.20% - 8.80% | 7.00% |
| Tax rate | 1.70% - 2.40% | 2.05% |
| Cost of debt | 4.00% - 4.50% | 4.25% |
| WACC | 4.0% - 4.8% | 4.4% |
| Category | Low | High |
| Long-term bond rate | 2.9% | 3.4% |
| Equity market risk premium | 6.0% | 7.0% |
| Adjusted beta | 0.38 | 0.71 |
| Additional risk adjustments | 0.0% | 0.5% |
| Cost of equity | 5.20% | 8.80% |
| Tax rate | 1.70% | 2.40% |
| Debt/Equity ratio | 10.49 | 10.49 |
| Cost of debt | 4.00% | 4.50% |
| After-tax WACC | 4.0% | 4.8% |
| Selected WACC | 4.4% | |
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 943.HK:
cost_of_equity (7.00%) = risk_free_rate (3.15%) + equity_risk_premium (6.50%) * adjusted_beta (0.38) + 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.