The WACC of Real Strips Ltd (513558.BO) is 9.1%.
| Range | Selected | |
| Cost of equity | 26.10% - 65.80% | 45.95% |
| Tax rate | 2.60% - 7.50% | 5.05% |
| Cost of debt | 4.00% - 8.80% | 6.40% |
| WACC | 5.6% - 12.5% | 9.1% |
| Category | Low | High |
| Long-term bond rate | 7.5% | 8.0% |
| Equity market risk premium | 6.9% | 7.9% |
| Adjusted beta | 2.68 | 7.23 |
| Additional risk adjustments | 0.0% | 0.5% |
| Cost of equity | 26.10% | 65.80% |
| Tax rate | 2.60% | 7.50% |
| Debt/Equity ratio | 12.23 | 12.23 |
| Cost of debt | 4.00% | 8.80% |
| After-tax WACC | 5.6% | 12.5% |
| Selected WACC | 9.1% | |
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 513558.BO:
cost_of_equity (45.95%) = risk_free_rate (7.75%) + equity_risk_premium (7.40%) * adjusted_beta (2.68) + 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.