The WACC of Apollo Hospitals Enterprise Ltd (APOLLOHOSP.NS) is 12.2%.
Range | Selected | |
Cost of equity | 11.40% - 13.70% | 12.55% |
Tax rate | 31.70% - 33.30% | 32.50% |
Cost of debt | 7.60% - 7.80% | 7.70% |
WACC | 11.1% - 13.3% | 12.2% |
Category | Low | High |
Long-term bond rate | 6.9% | 7.4% |
Equity market risk premium | 8.3% | 9.3% |
Adjusted beta | 0.55 | 0.63 |
Additional risk adjustments | 0.0% | 0.5% |
Cost of equity | 11.40% | 13.70% |
Tax rate | 31.70% | 33.30% |
Debt/Equity ratio | 0.05 | 0.05 |
Cost of debt | 7.60% | 7.80% |
After-tax WACC | 11.1% | 13.3% |
Selected WACC | 12.2% | |
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 APOLLOHOSP.NS:
cost_of_equity (12.55%) = risk_free_rate (7.15%) + equity_risk_premium (8.80%) * adjusted_beta (0.55) + 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.