The WACC of Pharmadrug Inc (PHRX.CN) is 4.3%.
| Range | Selected | |
| Cost of equity | 3.30% - 4.30% | 3.80% |
| Tax rate | 6.10% - 6.60% | 6.35% |
| Cost of debt | 5.00% - 5.00% | 5.00% |
| WACC | 4.1% - 4.5% | 4.3% |
| Category | Low | High |
| Long-term bond rate | 3.2% | 3.7% |
| Equity market risk premium | 5.1% | 6.1% |
| Adjusted beta | -0.06 | -0.06 |
| Additional risk adjustments | 0.5% | 1.0% |
| Cost of equity | 3.30% | 4.30% |
| Tax rate | 6.10% | 6.60% |
| Debt/Equity ratio | 1.29 | 1.29 |
| Cost of debt | 5.00% | 5.00% |
| After-tax WACC | 4.1% | 4.5% |
| Selected WACC | 4.3% | |
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 PHRX.CN:
cost_of_equity (3.80%) = risk_free_rate (3.45%) + equity_risk_premium (5.60%) * adjusted_beta (-0.06) + risk_adjustments (0.75%)
We include the risk adjustments, which range from 0% to 1%, to keep our WACC conservatives, especially for companies traded in developing markets.