700.HK WACC - Weighted Average Cost of Capital

The WACC of Tencent Holdings Ltd (700.HK) is 9.4%.

The Cost of Equity of Tencent Holdings Ltd (700.HK) is 9.80%.

The Cost of Debt of Tencent Holdings Ltd (700.HK) is 5.00%.

	Range	Selected
Cost of equity	8.60% - 11.00%	9.80%
Tax rate	10.70% - 14.10%	12.40%
Cost of debt	5.00% - 5.00%	5.00%
WACC	8.3% - 10.5%	9.4%

WACC

700.HK WACC calculation

Category	Low	High

Long-term bond rate	2.9%	3.4%
Equity market risk premium	6.0%	7.0%
Adjusted beta	0.95	1.03

Additional risk adjustments	0.0%	0.5%
Cost of equity	8.60%	11.00%

Tax rate	10.70%	14.10%
Debt/Equity ratio	0.08	0.08
Cost of debt	5.00%	5.00%

After-tax WACC	8.3%	10.5%


Selected WACC	9.4%

700.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 700.HK:

cost_of_equity (9.80%) = risk_free_rate (3.15%) + equity_risk_premium (6.50%) * adjusted_beta (0.95) + 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.