The WACC of Lizhi Inc (LIZI) is 9.0%.
| Range | Selected | |
| Cost of equity | 8.10% - 15.40% | 11.75% |
| Tax rate | 0.10% - 0.30% | 0.20% |
| Cost of debt | 5.00% - 5.00% | 5.00% |
| WACC | 6.9% - 11.1% | 9.0% |
| Category | Low | High |
| Long-term bond rate | 4.2% | 4.7% |
| Equity market risk premium | 4.6% | 5.6% |
| Adjusted beta | 0.86 | 1.83 |
| Additional risk adjustments | 0.0% | 0.5% |
| Cost of equity | 8.10% | 15.40% |
| Tax rate | 0.10% | 0.30% |
| Debt/Equity ratio | 0.69 | 0.69 |
| Cost of debt | 5.00% | 5.00% |
| After-tax WACC | 6.9% | 11.1% |
| Selected WACC | 9.0% | |
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 LIZI:
cost_of_equity (11.75%) = risk_free_rate (4.45%) + equity_risk_premium (5.10%) * adjusted_beta (0.86) + 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.