The WACC of Litian Pictures Holdings Ltd (9958.HK) is 9.1%.
| Range | Selected | |
| Cost of equity | 15.10% - 29.20% | 22.15% |
| Tax rate | 5.40% - 8.60% | 7.00% |
| Cost of debt | 4.00% - 6.40% | 5.20% |
| WACC | 6.6% - 11.7% | 9.1% |
| Category | Low | High |
| Long-term bond rate | 2.9% | 3.4% |
| Equity market risk premium | 6.0% | 7.0% |
| Adjusted beta | 2.05 | 3.63 |
| Additional risk adjustments | 0.0% | 0.5% |
| Cost of equity | 15.10% | 29.20% |
| Tax rate | 5.40% | 8.60% |
| Debt/Equity ratio | 3 | 3 |
| Cost of debt | 4.00% | 6.40% |
| After-tax WACC | 6.6% | 11.7% |
| Selected WACC | 9.1% | |
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 9958.HK:
cost_of_equity (22.15%) = risk_free_rate (3.15%) + equity_risk_premium (6.50%) * adjusted_beta (2.05) + 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.