The WACC of Xin Hwa Holdings Bhd (XINHWA.KL) is 7.7%.
| Range | Selected | |
| Cost of equity | 11.20% - 27.20% | 19.20% |
| Tax rate | 8.60% - 19.00% | 13.80% |
| Cost of debt | 4.30% - 7.00% | 5.65% |
| WACC | 5.4% - 10.1% | 7.7% |
| Category | Low | High |
| Long-term bond rate | 3.8% | 4.3% |
| Equity market risk premium | 6.9% | 7.8% |
| Adjusted beta | 1.07 | 2.86 |
| Additional risk adjustments | 0.0% | 0.5% |
| Cost of equity | 11.20% | 27.20% |
| Tax rate | 8.60% | 19.00% |
| Debt/Equity ratio | 3.92 | 3.92 |
| Cost of debt | 4.30% | 7.00% |
| After-tax WACC | 5.4% | 10.1% |
| Selected WACC | 7.7% | |
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 XINHWA.KL:
cost_of_equity (19.20%) = risk_free_rate (4.05%) + equity_risk_premium (7.35%) * adjusted_beta (1.07) + 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.