The WACC of China Xiangtai Food Co Ltd (PLIN) is 6.8%.
| Range | Selected | |
| Cost of equity | 5.10% - 8.60% | 6.85% |
| Tax rate | 8.00% - 11.20% | 9.60% |
| Cost of debt | 4.00% - 7.00% | 5.50% |
| WACC | 5.0% - 8.6% | 6.8% |
| Category | Low | High |
| Long-term bond rate | 3.2% | 3.7% |
| Equity market risk premium | 4.2% | 5.2% |
| Adjusted beta | 0.33 | 0.76 |
| Additional risk adjustments | 0.5% | 1.0% |
| Cost of equity | 5.10% | 8.60% |
| Tax rate | 8.00% | 11.20% |
| Debt/Equity ratio | 0.02 | 0.02 |
| Cost of debt | 4.00% | 7.00% |
| After-tax WACC | 5.0% | 8.6% |
| Selected WACC | 6.8% | |
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 PLIN:
cost_of_equity (6.85%) = risk_free_rate (3.45%) + equity_risk_premium (4.70%) * adjusted_beta (0.33) + 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.