The WACC of CSL Finance Ltd (530067.BO) is 8.3%.
| Range | Selected | |
| Cost of equity | 9.40% - 11.40% | 10.40% |
| Tax rate | 29.60% - 30.00% | 29.80% |
| Cost of debt | 5.00% - 5.00% | 5.00% |
| WACC | 7.6% - 9.0% | 8.3% |
| Category | Low | High |
| Long-term bond rate | 7.5% | 8.0% |
| Equity market risk premium | 6.9% | 7.9% |
| Adjusted beta | 0.27 | 0.36 |
| Additional risk adjustments | 0.0% | 0.5% |
| Cost of equity | 9.40% | 11.40% |
| Tax rate | 29.60% | 30.00% |
| Debt/Equity ratio | 0.42 | 0.42 |
| Cost of debt | 5.00% | 5.00% |
| After-tax WACC | 7.6% | 9.0% |
| Selected WACC | 8.3% | |
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 530067.BO:
cost_of_equity (10.40%) = risk_free_rate (7.75%) + equity_risk_premium (7.40%) * adjusted_beta (0.27) + 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.