The WACC of Smruthi Organics Ltd (540686.BO) is 15.2%.
| Range | Selected | |
| Cost of equity | 14.20% - 17.40% | 15.80% |
| Tax rate | 26.50% - 28.20% | 27.35% |
| Cost of debt | 8.10% - 15.20% | 11.65% |
| WACC | 13.5% - 16.8% | 15.2% |
| Category | Low | High |
| Long-term bond rate | 6.9% | 7.4% |
| Equity market risk premium | 8.3% | 9.3% |
| Adjusted beta | 0.89 | 1.02 |
| Additional risk adjustments | 0.0% | 0.5% |
| Cost of equity | 14.20% | 17.40% |
| Tax rate | 26.50% | 28.20% |
| Debt/Equity ratio | 0.09 | 0.09 |
| Cost of debt | 8.10% | 15.20% |
| After-tax WACC | 13.5% | 16.8% |
| Selected WACC | 15.2% | |
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 540686.BO:
cost_of_equity (15.80%) = risk_free_rate (7.15%) + equity_risk_premium (8.80%) * adjusted_beta (0.89) + 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.