BABA
Alibaba Group Holding Ltd
Price:  
117.07 
USD
Volume:  
12,189,334.00
China | Internet & Direct Marketing Retail
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Alibaba WACC - Weighted Average Cost of Capital

The WACC of Alibaba Group Holding Ltd (BABA) is 7.9%.

The Cost of Equity of Alibaba Group Holding Ltd (BABA) is 8.35%.
The Cost of Debt of Alibaba Group Holding Ltd (BABA) is 4.40%.

Range Selected
Cost of equity 7.10% - 9.60% 8.35%
Tax rate 20.40% - 22.40% 21.40%
Cost of debt 4.30% - 4.50% 4.40%
WACC 6.8% - 9.0% 7.9%
WACC

Alibaba WACC calculation

Category Low High
Long-term bond rate 3.9% 4.4%
Equity market risk premium 4.6% 5.6%
Adjusted beta 0.71 0.85
Additional risk adjustments 0.0% 0.5%
Cost of equity 7.10% 9.60%
Tax rate 20.40% 22.40%
Debt/Equity ratio 0.11 0.11
Cost of debt 4.30% 4.50%
After-tax WACC 6.8% 9.0%
Selected WACC 7.9%

Alibaba's CAPM model and how its cost of Equity is calculated

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 Alibaba:

cost_of_equity (8.35%) = risk_free_rate (4.15%) + equity_risk_premium (5.10%) * adjusted_beta (0.71) + 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.