PDD WACC - Weighted Average Cost of Capital
The WACC of Pinduoduo Inc (PDD) is 8.4%.
| Range | Selected | |
| Cost of equity | 7.0% - 9.9% | 8.45% |
| Tax rate | 14.4% - 15.8% | 15.1% |
| Cost of debt | 5.0% - 5.0% | 5% |
| WACC | 7.0% - 9.9% | 8.4% |
| Category | Low | High |
| Long-term bond rate | 3.9% | 4.4% |
| Equity market risk premium | 4.6% | 5.6% |
| Adjusted beta | 0.69 | 0.9 |
| Additional risk adjustments | 0.0% | 0.5% |
| Cost of equity | 7.0% | 9.9% |
| Tax rate | 14.4% | 15.8% |
| Debt/Equity ratio | 0 | 0 |
| Cost of debt | 5.0% | 5.0% |
| After-tax WACC | 7.0% | 9.9% |
| Selected WACC | 8.4% | |
| Debt/Equity | Unlevered | |||
| Peers | Company Name | ratio | Beta | beta |
| PDD | Pinduoduo Inc | 0 | 0.75 | 0.75 |
| DLTH | Duluth Holdings Inc | 0.86 | 0.7 | 0.4 |
| ETSY | ETSY Inc | 0.49 | 0.51 | 0.36 |
| FLWS | 1-800-Flowers.Com Inc | 0.61 | 1.5 | 0.99 |
| GRPN | Groupon Inc | 0.25 | 1.9 | 1.57 |
| LE | Lands End Inc | 0.91 | 0.96 | 0.55 |
| LEJU | Leju Holdings Ltd | 0.05 | 1.56 | 1.5 |
| PRTS | Carparts.Com Inc | 0.26 | 0.61 | 0.5 |
| REAL | RealReal Inc | 0.77 | 1.77 | 1.07 |
| VIPS | Vipshop Holdings Ltd | 0.05 | 0.4 | 0.38 |
| Low | High | |
| Unlevered beta | 0.53 | 0.85 |
| Relevered beta | 0.54 | 0.85 |
| Adjusted relevered beta | 0.69 | 0.9 |
PDD'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 PDD:
cost_of_equity (8.45%) = risk_free_rate (4.15%) + equity_risk_premium (5.10%) * adjusted_beta (0.69) + 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.