The WACC of Lotus Chocolate Co Ltd (523475.BO) is 12.9%.
| Range | Selected | |
| Cost of equity | 11.50% - 14.30% | 12.90% |
| Tax rate | 3.40% - 9.20% | 6.30% |
| Cost of debt | 4.00% - 7.50% | 5.75% |
| WACC | 11.4% - 14.3% | 12.9% |
| Category | Low | High |
| Long-term bond rate | 6.9% | 7.4% |
| Equity market risk premium | 8.3% | 9.3% |
| Adjusted beta | 0.55 | 0.7 |
| Additional risk adjustments | 0.0% | 0.5% |
| Cost of equity | 11.50% | 14.30% |
| Tax rate | 3.40% | 9.20% |
| Debt/Equity ratio | 0 | 0 |
| Cost of debt | 4.00% | 7.50% |
| After-tax WACC | 11.4% | 14.3% |
| Selected WACC | 12.9% | |
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 (12.90%) = risk_free_rate (7.15%) + equity_risk_premium (8.80%) * adjusted_beta (0.55) + 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.