The WACC of Adani Green Energy Ltd (ADANIGREEN.NS) is 13.5%.
Range | Selected | |
Cost of equity | 12.70% - 18.30% | 15.50% |
Tax rate | 13.50% - 20.60% | 17.05% |
Cost of debt | 9.80% - 12.10% | 10.95% |
WACC | 11.4% - 15.6% | 13.5% |
Category | Low | High |
Long-term bond rate | 6.9% | 7.4% |
Equity market risk premium | 8.3% | 9.3% |
Adjusted beta | 0.7 | 1.12 |
Additional risk adjustments | 0.0% | 0.5% |
Cost of equity | 12.70% | 18.30% |
Tax rate | 13.50% | 20.60% |
Debt/Equity ratio | 0.46 | 0.46 |
Cost of debt | 9.80% | 12.10% |
After-tax WACC | 11.4% | 15.6% |
Selected WACC | 13.5% | |
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 ADANIGREEN.NS:
cost_of_equity (15.50%) = risk_free_rate (7.15%) + equity_risk_premium (8.80%) * adjusted_beta (0.7) + 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.