The WACC of ABC India Ltd (520123.BO) is 16.3%.
| Range | Selected | |
| Cost of equity | 14.00% - 19.10% | 16.55% |
| Tax rate | 11.00% - 17.10% | 14.05% |
| Cost of debt | 10.50% - 26.90% | 18.70% |
| WACC | 12.2% - 20.3% | 16.3% |
| Category | Low | High |
| Long-term bond rate | 6.9% | 7.4% |
| Equity market risk premium | 8.3% | 9.3% |
| Adjusted beta | 0.86 | 1.2 |
| Additional risk adjustments | 0.0% | 0.5% |
| Cost of equity | 14.00% | 19.10% |
| Tax rate | 11.00% | 17.10% |
| Debt/Equity ratio | 0.64 | 0.64 |
| Cost of debt | 10.50% | 26.90% |
| After-tax WACC | 12.2% | 20.3% |
| Selected WACC | 16.3% | |
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 520123.BO:
cost_of_equity (16.55%) = risk_free_rate (7.15%) + equity_risk_premium (8.80%) * adjusted_beta (0.86) + 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.