LEMONTREE.NS WACC - Weighted Average Cost of Capital

The WACC of Lemon Tree Hotels Ltd (LEMONTREE.NS) is 13.3%.

The Cost of Equity of Lemon Tree Hotels Ltd (LEMONTREE.NS) is 14.70%.

The Cost of Debt of Lemon Tree Hotels Ltd (LEMONTREE.NS) is 8.10%.

	Range	Selected
Cost of equity	11.90% - 17.50%	14.70%
Tax rate	15.40% - 16.70%	16.05%
Cost of debt	7.10% - 9.10%	8.10%
WACC	10.9% - 15.7%	13.3%

WACC

LEMONTREE.NS WACC calculation

Category	Low	High

Long-term bond rate	6.9%	7.4%
Equity market risk premium	8.3%	9.3%
Adjusted beta	0.61	1.03

Additional risk adjustments	0.0%	0.5%
Cost of equity	11.90%	17.50%

Tax rate	15.40%	16.70%
Debt/Equity ratio	0.21	0.21
Cost of debt	7.10%	9.10%

After-tax WACC	10.9%	15.7%


Selected WACC	13.3%

LEMONTREE.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 LEMONTREE.NS:

cost_of_equity (14.70%) = risk_free_rate (7.15%) + equity_risk_premium (8.80%) * adjusted_beta (0.61) + 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.