The WACC of Riddhi Steel and Tube Ltd (540082.BO) is 12.0%.
| Range | Selected | |
| Cost of equity | 11.60% - 17.70% | 14.65% |
| Tax rate | 27.20% - 28.30% | 27.75% |
| Cost of debt | 9.50% - 10.50% | 10.00% |
| WACC | 9.9% - 14.0% | 12.0% |
| Category | Low | High |
| Long-term bond rate | 6.9% | 7.4% |
| Equity market risk premium | 8.3% | 9.3% |
| Adjusted beta | 0.57 | 1.05 |
| Additional risk adjustments | 0.0% | 0.5% |
| Cost of equity | 11.60% | 17.70% |
| Tax rate | 27.20% | 28.30% |
| Debt/Equity ratio | 0.56 | 0.56 |
| Cost of debt | 9.50% | 10.50% |
| After-tax WACC | 9.9% | 14.0% |
| Selected WACC | 12.0% | |
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 540082.BO:
cost_of_equity (14.65%) = risk_free_rate (7.15%) + equity_risk_premium (8.80%) * adjusted_beta (0.57) + 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.