The WACC of Bank of India Ltd (BANKINDIA.NS) is 9.1%.
| Range | Selected | |
| Cost of equity | 19.70% - 24.80% | 22.25% |
| Tax rate | 35.00% - 36.80% | 35.90% |
| Cost of debt | 5.00% - 5.00% | 5.00% |
| WACC | 8.3% - 9.9% | 9.1% |
| Category | Low | High |
| Long-term bond rate | 6.9% | 7.4% |
| Equity market risk premium | 8.3% | 9.3% |
| Adjusted beta | 1.55 | 1.82 |
| Additional risk adjustments | 0.0% | 0.5% |
| Cost of equity | 19.70% | 24.80% |
| Tax rate | 35.00% | 36.80% |
| Debt/Equity ratio | 2.23 | 2.23 |
| Cost of debt | 5.00% | 5.00% |
| After-tax WACC | 8.3% | 9.9% |
| Selected WACC | 9.1% | |
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 BANKINDIA.NS:
cost_of_equity (22.25%) = risk_free_rate (7.15%) + equity_risk_premium (8.80%) * adjusted_beta (1.55) + 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.