The WACC of Avenue Supermarts Ltd (DMART.NS) is 12.0%.
| Range | Selected | |
| Cost of equity | 10.40% - 13.60% | 12.00% |
| Tax rate | 25.70% - 26.20% | 25.95% |
| Cost of debt | 7.50% - 11.60% | 9.55% |
| WACC | 10.4% - 13.6% | 12.0% |
| Category | Low | High |
| Long-term bond rate | 6.9% | 7.4% |
| Equity market risk premium | 8.3% | 9.3% |
| Adjusted beta | 0.42 | 0.62 |
| Additional risk adjustments | 0.0% | 0.5% |
| Cost of equity | 10.40% | 13.60% |
| Tax rate | 25.70% | 26.20% |
| Debt/Equity ratio | 0 | 0 |
| Cost of debt | 7.50% | 11.60% |
| After-tax WACC | 10.4% | 13.6% |
| Selected WACC | 12.0% | |
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 DMART.NS:
cost_of_equity (12.00%) = risk_free_rate (7.15%) + equity_risk_premium (8.80%) * adjusted_beta (0.42) + 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.