The WACC of Zim Laboratories Ltd (541400.BO) is 14.4%.
| Range | Selected | |
| Cost of equity | 13.80% - 16.20% | 15.00% |
| Tax rate | 29.70% - 30.60% | 30.15% |
| Cost of debt | 12.70% - 13.40% | 13.05% |
| WACC | 13.3% - 15.5% | 14.4% |
| Category | Low | High |
| Long-term bond rate | 7.4% | 7.9% |
| Equity market risk premium | 6.9% | 7.9% |
| Adjusted beta | 0.92 | 0.98 |
| Additional risk adjustments | 0.0% | 0.5% |
| Cost of equity | 13.80% | 16.20% |
| Tax rate | 29.70% | 30.60% |
| Debt/Equity ratio | 0.11 | 0.11 |
| Cost of debt | 12.70% | 13.40% |
| After-tax WACC | 13.3% | 15.5% |
| Selected WACC | 14.4% | |
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 541400.BO:
cost_of_equity (15.00%) = risk_free_rate (7.65%) + equity_risk_premium (7.40%) * adjusted_beta (0.92) + 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.