CHENNPETRO.NS WACC - Weighted Average Cost of Capital

The WACC of Chennai Petroleum Corporation Ltd (CHENNPETRO.NS) is 13.5%.

The Cost of Equity of Chennai Petroleum Corporation Ltd (CHENNPETRO.NS) is 16.40%.

The Cost of Debt of Chennai Petroleum Corporation Ltd (CHENNPETRO.NS) is 6.25%.

	Range	Selected
Cost of equity	14.00% - 18.80%	16.40%
Tax rate	26.20% - 26.50%	26.35%
Cost of debt	5.50% - 7.00%	6.25%
WACC	11.6% - 15.5%	13.5%

WACC

CHENNPETRO.NS WACC calculation

Category	Low	High

Long-term bond rate	6.9%	7.4%
Equity market risk premium	8.3%	9.3%
Adjusted beta	0.85	1.17

Additional risk adjustments	0.0%	0.5%
Cost of equity	14.00%	18.80%

Tax rate	26.20%	26.50%
Debt/Equity ratio	0.32	0.32
Cost of debt	5.50%	7.00%

After-tax WACC	11.6%	15.5%


Selected WACC	13.5%

CHENNPETRO.NS's CAPM model and how its cost of Equity is calculated

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 CHENNPETRO.NS:

cost_of_equity (16.40%) = risk_free_rate (7.15%) + equity_risk_premium (8.80%) * adjusted_beta (0.85) + 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.