The WACC of Tasty Dairy Specialities Ltd (540955.BO) is 9.5%.
| Range | Selected | |
| Cost of equity | 13.30% - 26.20% | 19.75% |
| Tax rate | 25.50% - 26.80% | 26.15% |
| Cost of debt | 7.00% - 10.90% | 8.95% |
| WACC | 7.0% - 12.0% | 9.5% |
| Category | Low | High |
| Long-term bond rate | 6.9% | 7.4% |
| Equity market risk premium | 8.3% | 9.3% |
| Adjusted beta | 0.78 | 1.96 |
| Additional risk adjustments | 0.0% | 0.5% |
| Cost of equity | 13.30% | 26.20% |
| Tax rate | 25.50% | 26.80% |
| Debt/Equity ratio | 3.53 | 3.53 |
| Cost of debt | 7.00% | 10.90% |
| After-tax WACC | 7.0% | 12.0% |
| Selected WACC | 9.5% | |
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 540955.BO:
cost_of_equity (19.75%) = risk_free_rate (7.15%) + equity_risk_premium (8.80%) * adjusted_beta (0.78) + 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.