The WACC of Rama Phosphates Ltd (524037.BO) is 15.0%.
| Range | Selected | |
| Cost of equity | 13.30% - 16.80% | 15.05% |
| Tax rate | 25.60% - 28.90% | 27.25% |
| Cost of debt | 8.20% - 32.40% | 20.30% |
| WACC | 12.6% - 17.4% | 15.0% |
| Category | Low | High |
| Long-term bond rate | 7.5% | 8.0% |
| Equity market risk premium | 6.9% | 7.9% |
| Adjusted beta | 0.83 | 1.05 |
| Additional risk adjustments | 0.0% | 0.5% |
| Cost of equity | 13.30% | 16.80% |
| Tax rate | 25.60% | 28.90% |
| Debt/Equity ratio | 0.1 | 0.1 |
| Cost of debt | 8.20% | 32.40% |
| After-tax WACC | 12.6% | 17.4% |
| Selected WACC | 15.0% | |
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 524037.BO:
cost_of_equity (15.05%) = risk_free_rate (7.75%) + equity_risk_premium (7.40%) * adjusted_beta (0.83) + 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.