The WACC of Rainbow Denim Ltd (532441.BO) is 5.1%.
| Range | Selected | |
| Cost of equity | 29.90% - 49.20% | 39.55% |
| Tax rate | 30.00% - 30.00% | 30.00% |
| Cost of debt | 4.00% - 7.50% | 5.75% |
| WACC | 3.7% - 6.6% | 5.1% |
| Category | Low | High |
| Long-term bond rate | 6.9% | 7.4% |
| Equity market risk premium | 8.3% | 9.3% |
| Adjusted beta | 2.77 | 4.44 |
| Additional risk adjustments | 0.0% | 0.5% |
| Cost of equity | 29.90% | 49.20% |
| Tax rate | 30.00% | 30.00% |
| Debt/Equity ratio | 30.34 | 30.34 |
| Cost of debt | 4.00% | 7.50% |
| After-tax WACC | 3.7% | 6.6% |
| Selected WACC | 5.1% | |
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 532441.BO:
cost_of_equity (39.55%) = risk_free_rate (7.15%) + equity_risk_premium (8.80%) * adjusted_beta (2.77) + 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.