The WACC of Loyal Textile Mills Ltd (514036.BO) is 12.2%.
| Range | Selected | |
| Cost of equity | 15.10% - 18.60% | 16.85% |
| Tax rate | 23.30% - 31.60% | 27.45% |
| Cost of debt | 7.90% - 11.60% | 9.75% |
| WACC | 10.9% - 13.6% | 12.2% |
| Category | Low | High |
| Long-term bond rate | 7.5% | 8.0% |
| Equity market risk premium | 6.9% | 7.9% |
| Adjusted beta | 1.1 | 1.27 |
| Additional risk adjustments | 0.0% | 0.5% |
| Cost of equity | 15.10% | 18.60% |
| Tax rate | 23.30% | 31.60% |
| Debt/Equity ratio | 0.88 | 0.88 |
| Cost of debt | 7.90% | 11.60% |
| After-tax WACC | 10.9% | 13.6% |
| Selected WACC | 12.2% | |
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 514036.BO:
cost_of_equity (16.85%) = risk_free_rate (7.75%) + equity_risk_premium (7.40%) * adjusted_beta (1.1) + 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.