The WACC of Larsen & Toubro Infotech Ltd (LTI.NS) is 14.0%.
| Range | Selected | |
| Cost of equity | 12.40% - 15.80% | 14.10% |
| Tax rate | 24.90% - 25.20% | 25.05% |
| Cost of debt | 8.10% - 12.60% | 10.35% |
| WACC | 12.4% - 15.7% | 14.0% |
| Category | Low | High |
| Long-term bond rate | 7.4% | 7.9% |
| Equity market risk premium | 6.9% | 7.9% |
| Adjusted beta | 0.72 | 0.93 |
| Additional risk adjustments | 0.0% | 0.5% |
| Cost of equity | 12.40% | 15.80% |
| Tax rate | 24.90% | 25.20% |
| Debt/Equity ratio | 0.01 | 0.01 |
| Cost of debt | 8.10% | 12.60% |
| After-tax WACC | 12.4% | 15.7% |
| Selected WACC | 14.0% | |
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 LTI.NS:
cost_of_equity (14.10%) = risk_free_rate (7.65%) + equity_risk_premium (7.40%) * adjusted_beta (0.72) + 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.