The WACC of Vishal Bearings Ltd (539398.BO) is 13.3%.
| Range | Selected | |
| Cost of equity | 12.70% - 17.10% | 14.90% |
| Tax rate | 27.40% - 29.00% | 28.20% |
| Cost of debt | 9.00% - 23.90% | 16.45% |
| WACC | 9.6% - 17.0% | 13.3% |
| Category | Low | High |
| Long-term bond rate | 6.9% | 7.4% |
| Equity market risk premium | 8.3% | 9.3% |
| Adjusted beta | 0.7 | 0.99 |
| Additional risk adjustments | 0.0% | 0.5% |
| Cost of equity | 12.70% | 17.10% |
| Tax rate | 27.40% | 29.00% |
| Debt/Equity ratio | 1 | 1 |
| Cost of debt | 9.00% | 23.90% |
| After-tax WACC | 9.6% | 17.0% |
| Selected WACC | 13.3% | |
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 539398.BO:
cost_of_equity (14.90%) = risk_free_rate (7.15%) + equity_risk_premium (8.80%) * adjusted_beta (0.7) + 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.