The WACC of Lotus Chocolate Co Ltd (523475.BO) is 15.3%.
| Range | Selected | |
| Cost of equity | 13.70% - 16.30% | 15.00% |
| Tax rate | 3.40% - 13.40% | 8.40% |
| Cost of debt | 8.10% - 31.90% | 20.00% |
| WACC | 13.1% - 17.5% | 15.3% |
| Category | Low | High |
| Long-term bond rate | 6.9% | 7.4% |
| Equity market risk premium | 8.3% | 9.3% |
| Adjusted beta | 0.82 | 0.9 |
| Additional risk adjustments | 0.0% | 0.5% |
| Cost of equity | 13.70% | 16.30% |
| Tax rate | 3.40% | 13.40% |
| Debt/Equity ratio | 0.12 | 0.12 |
| Cost of debt | 8.10% | 31.90% |
| After-tax WACC | 13.1% | 17.5% |
| Selected WACC | 15.3% | |
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 523475.BO:
cost_of_equity (15.00%) = risk_free_rate (7.15%) + equity_risk_premium (8.80%) * adjusted_beta (0.82) + 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.