The WACC of Housing and Urban Development Corporation Ltd (HUDCO.NS) is 7.1%.
Range | Selected | |
Cost of equity | 10.50% - 14.90% | 12.70% |
Tax rate | 25.60% - 26.10% | 25.85% |
Cost of debt | 5.00% - 5.00% | 5.00% |
WACC | 6.2% - 7.9% | 7.1% |
Category | Low | High |
Long-term bond rate | 6.9% | 7.4% |
Equity market risk premium | 8.3% | 9.3% |
Adjusted beta | 0.43 | 0.76 |
Additional risk adjustments | 0.0% | 0.5% |
Cost of equity | 10.50% | 14.90% |
Tax rate | 25.60% | 26.10% |
Debt/Equity ratio | 1.67 | 1.67 |
Cost of debt | 5.00% | 5.00% |
After-tax WACC | 6.2% | 7.9% |
Selected WACC | 7.1% | |
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 HUDCO.NS:
cost_of_equity (12.70%) = risk_free_rate (7.15%) + equity_risk_premium (8.80%) * adjusted_beta (0.43) + 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.