The WACC of Nirlon Ltd (500307.BO) is 11.4%.
| Range | Selected | |
| Cost of equity | 11.70% - 13.80% | 12.75% |
| Tax rate | 32.00% - 33.50% | 32.75% |
| Cost of debt | 8.80% - 9.10% | 8.95% |
| WACC | 10.5% - 12.3% | 11.4% |
| Category | Low | High |
| Long-term bond rate | 6.9% | 7.4% |
| Equity market risk premium | 8.3% | 9.3% |
| Adjusted beta | 0.58 | 0.64 |
| Additional risk adjustments | 0.0% | 0.5% |
| Cost of equity | 11.70% | 13.80% |
| Tax rate | 32.00% | 33.50% |
| Debt/Equity ratio | 0.25 | 0.25 |
| Cost of debt | 8.80% | 9.10% |
| After-tax WACC | 10.5% | 12.3% |
| Selected WACC | 11.4% | |
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 500307.BO:
cost_of_equity (12.75%) = risk_free_rate (7.15%) + equity_risk_premium (8.80%) * adjusted_beta (0.58) + 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.