1703.HK WACC - Weighted Average Cost of Capital

The WACC of Palace Banquet Holdings Ltd (1703.HK) is 5.9%.

The Cost of Equity of Palace Banquet Holdings Ltd (1703.HK) is 8.20%.

The Cost of Debt of Palace Banquet Holdings Ltd (1703.HK) is 4.25%.

	Range	Selected
Cost of equity	6.40% - 10.00%	8.20%
Tax rate	0.30% - 0.60%	0.45%
Cost of debt	4.00% - 4.50%	4.25%
WACC	5.0% - 6.8%	5.9%

WACC

1703.HK WACC calculation

Category	Low	High

Long-term bond rate	2.9%	3.4%
Equity market risk premium	6.0%	7.0%
Adjusted beta	0.59	0.88

Additional risk adjustments	0.0%	0.5%
Cost of equity	6.40%	10.00%

Tax rate	0.30%	0.60%
Debt/Equity ratio	1.34	1.34
Cost of debt	4.00%	4.50%

After-tax WACC	5.0%	6.8%


Selected WACC	5.9%

1703.HK'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 1703.HK:

cost_of_equity (8.20%) = risk_free_rate (3.15%) + equity_risk_premium (6.50%) * adjusted_beta (0.59) + 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.