The WACC of International Combustion (India) Ltd (505737.BO) is 16.5%.
| Range | Selected | |
| Cost of equity | 16.30% - 19.40% | 17.85% |
| Tax rate | 21.60% - 25.60% | 23.60% |
| Cost of debt | 15.40% - 18.70% | 17.05% |
| WACC | 15.2% - 17.9% | 16.5% |
| Category | Low | High |
| Long-term bond rate | 6.9% | 7.4% |
| Equity market risk premium | 8.3% | 9.3% |
| Adjusted beta | 1.14 | 1.24 |
| Additional risk adjustments | 0.0% | 0.5% |
| Cost of equity | 16.30% | 19.40% |
| Tax rate | 21.60% | 25.60% |
| Debt/Equity ratio | 0.37 | 0.37 |
| Cost of debt | 15.40% | 18.70% |
| After-tax WACC | 15.2% | 17.9% |
| Selected WACC | 16.5% | |
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 505737.BO:
cost_of_equity (17.85%) = risk_free_rate (7.15%) + equity_risk_premium (8.80%) * adjusted_beta (1.14) + 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.