The WACC of Pearl River Holdings Ltd (PRH.V) is 7.0%.
| Range | Selected | |
| Cost of equity | 13.10% - 17.90% | 15.50% |
| Tax rate | 17.60% - 24.00% | 20.80% |
| Cost of debt | 4.60% - 8.00% | 6.30% |
| WACC | 5.6% - 8.4% | 7.0% |
| Category | Low | High |
| Long-term bond rate | 3.9% | 4.4% |
| Equity market risk premium | 5.1% | 6.1% |
| Adjusted beta | 1.82 | 2.14 |
| Additional risk adjustments | 0.0% | 0.5% |
| Cost of equity | 13.10% | 17.90% |
| Tax rate | 17.60% | 24.00% |
| Debt/Equity ratio | 4.09 | 4.09 |
| Cost of debt | 4.60% | 8.00% |
| After-tax WACC | 5.6% | 8.4% |
| Selected WACC | 7.0% | |
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 PRH.V:
cost_of_equity (15.50%) = risk_free_rate (4.15%) + equity_risk_premium (5.60%) * adjusted_beta (1.82) + 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.