The WACC of CEAT Ltd (CEATLTD.NS) is 14.7%.
| Range | Selected | |
| Cost of equity | 13.90% - 17.40% | 15.65% |
| Tax rate | 25.70% - 26.20% | 25.95% |
| Cost of debt | 8.60% - 11.50% | 10.05% |
| WACC | 13.0% - 16.4% | 14.7% |
| Category | Low | High |
| Long-term bond rate | 6.9% | 7.4% |
| Equity market risk premium | 8.3% | 9.3% |
| Adjusted beta | 0.84 | 1.03 |
| Additional risk adjustments | 0.0% | 0.5% |
| Cost of equity | 13.90% | 17.40% |
| Tax rate | 25.70% | 26.20% |
| Debt/Equity ratio | 0.12 | 0.12 |
| Cost of debt | 8.60% | 11.50% |
| After-tax WACC | 13.0% | 16.4% |
| Selected WACC | 14.7% | |
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 CEATLTD.NS:
cost_of_equity (15.65%) = risk_free_rate (7.15%) + equity_risk_premium (8.80%) * adjusted_beta (0.84) + 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.