The WACC of Tempus Holdings Ltd (6880.HK) is 5.4%.
| Range | Selected | |
| Cost of equity | 5.20% - 10.60% | 7.90% |
| Tax rate | 0.40% - 1.00% | 0.70% |
| Cost of debt | 5.00% - 5.00% | 5.00% |
| WACC | 5.0% - 5.7% | 5.4% |
| Category | Low | High |
| Long-term bond rate | 2.9% | 3.4% |
| Equity market risk premium | 6.0% | 7.0% |
| Adjusted beta | -0.11 | 0.54 |
| Additional risk adjustments | 3.0% | 3.5% |
| Cost of equity | 5.20% | 10.60% |
| Tax rate | 0.40% | 1.00% |
| Debt/Equity ratio | 6.44 | 6.44 |
| Cost of debt | 5.00% | 5.00% |
| After-tax WACC | 5.0% | 5.7% |
| Selected WACC | 5.4% | |
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 6880.HK:
cost_of_equity (7.90%) = risk_free_rate (3.15%) + equity_risk_premium (6.50%) * adjusted_beta (-0.11) + risk_adjustments (3.25%)
We include the risk adjustments, which range from 0% to 1%, to keep our WACC conservatives, especially for companies traded in developing markets.