TIPS WACC - Weighted Average Cost of Capital
The WACC of Tianrong Internet Products and Services Inc (TIPS) is 5.7%.
| Range | Selected | |
| Cost of equity | 5.0% - 6.7% | 5.85% |
| Tax rate | 0.7% - 1.1% | 0.9% |
| Cost of debt | 5.0% - 5.0% | 5% |
| WACC | 5.0% - 6.5% | 5.7% |
| Category | Low | High |
| Long-term bond rate | 3.9% | 4.4% |
| Equity market risk premium | 4.6% | 5.6% |
| Adjusted beta | 0.24 | 0.33 |
| Additional risk adjustments | 0.0% | 0.5% |
| Cost of equity | 5.0% | 6.7% |
| Tax rate | 0.7% | 1.1% |
| Debt/Equity ratio | 0.15 | 0.15 |
| Cost of debt | 5.0% | 5.0% |
| After-tax WACC | 5.0% | 6.5% |
| Selected WACC | 5.7% | |
| Debt/Equity | Unlevered | |||
| Peers | Company Name | ratio | Beta | beta |
| TIPS | Tianrong Internet Products and Services Inc | 0.15 | -1.64 | -1.43 |
| Low | High | |
| Unlevered beta | -1.43 | -1.43 |
| Relevered beta | -0.13 | 0 |
| Adjusted relevered beta | 0.24 | 0.33 |
TIPS'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 TIPS:
cost_of_equity (5.85%) = risk_free_rate (4.15%) + equity_risk_premium (5.10%) * adjusted_beta (0.24) + 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.