The WACC of GVK Power & Infrastructure Ltd (GVKPIL.NS) is 14.4%.
| Range | Selected | |
| Cost of equity | 52.30% - 75.40% | 63.85% |
| Tax rate | 9.10% - 13.40% | 11.25% |
| Cost of debt | 4.60% - 15.40% | 10.00% |
| WACC | 9.1% - 19.7% | 14.4% |
| Category | Low | High |
| Long-term bond rate | 6.9% | 7.4% |
| Equity market risk premium | 8.3% | 9.3% |
| Adjusted beta | 5.46 | 7.25 |
| Additional risk adjustments | 0.0% | 0.5% |
| Cost of equity | 52.30% | 75.40% |
| Tax rate | 9.10% | 13.40% |
| Debt/Equity ratio | 8.75 | 8.75 |
| Cost of debt | 4.60% | 15.40% |
| After-tax WACC | 9.1% | 19.7% |
| Selected WACC | 14.4% | |
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 GVKPIL.NS:
cost_of_equity (63.85%) = risk_free_rate (7.15%) + equity_risk_premium (8.80%) * adjusted_beta (5.46) + 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.