The WACC of East West Holdings Ltd (540006.BO) is 9.7%.
| Range | Selected | |
| Cost of equity | 15.70% - 19.90% | 17.80% |
| Tax rate | 33.70% - 35.20% | 34.45% |
| Cost of debt | 7.00% - 12.00% | 9.50% |
| WACC | 8.0% - 11.4% | 9.7% |
| Category | Low | High |
| Long-term bond rate | 6.9% | 7.4% |
| Equity market risk premium | 8.3% | 9.3% |
| Adjusted beta | 1.07 | 1.29 |
| Additional risk adjustments | 0.0% | 0.5% |
| Cost of equity | 15.70% | 19.90% |
| Tax rate | 33.70% | 35.20% |
| Debt/Equity ratio | 2.34 | 2.34 |
| Cost of debt | 7.00% | 12.00% |
| After-tax WACC | 8.0% | 11.4% |
| Selected WACC | 9.7% | |
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 540006.BO:
cost_of_equity (17.80%) = risk_free_rate (7.15%) + equity_risk_premium (8.80%) * adjusted_beta (1.07) + 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.