The WACC of Veejay Lakshmi Engineering Works Ltd (522267.BO) is 12.1%.
| Range | Selected | |
| Cost of equity | 17.60% - 22.40% | 20.00% |
| Tax rate | 2.10% - 3.90% | 3.00% |
| Cost of debt | 7.00% - 8.30% | 7.65% |
| WACC | 10.9% - 13.4% | 12.1% |
| Category | Low | High |
| Long-term bond rate | 6.9% | 7.4% |
| Equity market risk premium | 8.3% | 9.3% |
| Adjusted beta | 1.29 | 1.56 |
| Additional risk adjustments | 0.0% | 0.5% |
| Cost of equity | 17.60% | 22.40% |
| Tax rate | 2.10% | 3.90% |
| Debt/Equity ratio | 1.66 | 1.66 |
| Cost of debt | 7.00% | 8.30% |
| After-tax WACC | 10.9% | 13.4% |
| Selected WACC | 12.1% | |
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 522267.BO:
cost_of_equity (20.00%) = risk_free_rate (7.15%) + equity_risk_premium (8.80%) * adjusted_beta (1.29) + 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.