The WACC of Lorenzini Apparels Ltd (540952.BO) is 12.5%.
| Range | Selected | |
| Cost of equity | 11.30% - 15.20% | 13.25% |
| Tax rate | 37.60% - 47.10% | 42.35% |
| Cost of debt | 5.00% - 5.00% | 5.00% |
| WACC | 10.7% - 14.3% | 12.5% |
| Category | Low | High |
| Long-term bond rate | 7.4% | 7.9% |
| Equity market risk premium | 6.9% | 7.9% |
| Adjusted beta | 0.56 | 0.86 |
| Additional risk adjustments | 0.0% | 0.5% |
| Cost of equity | 11.30% | 15.20% |
| Tax rate | 37.60% | 47.10% |
| Debt/Equity ratio | 0.08 | 0.08 |
| Cost of debt | 5.00% | 5.00% |
| After-tax WACC | 10.7% | 14.3% |
| Selected WACC | 12.5% | |
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 540952.BO:
cost_of_equity (13.25%) = risk_free_rate (7.65%) + equity_risk_premium (7.40%) * adjusted_beta (0.56) + 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.