The WACC of UTime Ltd (UTME) is 11.0%.
| Range | Selected | |
| Cost of equity | 9.70% - 14.70% | 12.20% |
| Tax rate | 0.20% - 0.60% | 0.40% |
| Cost of debt | 7.00% - 13.30% | 10.15% |
| WACC | 8.2% - 13.9% | 11.0% |
| Category | Low | High |
| Long-term bond rate | 4.2% | 4.7% |
| Equity market risk premium | 5.0% | 6.0% |
| Adjusted beta | 1.11 | 1.58 |
| Additional risk adjustments | 0.0% | 0.5% |
| Cost of equity | 9.70% | 14.70% |
| Tax rate | 0.20% | 0.60% |
| Debt/Equity ratio | 1.31 | 1.31 |
| Cost of debt | 7.00% | 13.30% |
| After-tax WACC | 8.2% | 13.9% |
| Selected WACC | 11.0% | |
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 UTME:
cost_of_equity (12.20%) = risk_free_rate (4.45%) + equity_risk_premium (5.50%) * adjusted_beta (1.11) + 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.