The WACC of Mahindra and Mahindra Financial Services Ltd (M&MFIN.NS) is 12.9%.
| Range | Selected | |
| Cost of equity | 13.80% - 19.00% | 16.40% |
| Tax rate | 25.20% - 25.60% | 25.40% |
| Cost of debt | 7.70% - 23.90% | 15.80% |
| WACC | 7.8% - 18.1% | 12.9% |
| Category | Low | High |
| Long-term bond rate | 6.9% | 7.4% |
| Equity market risk premium | 8.3% | 9.3% |
| Adjusted beta | 0.84 | 1.2 |
| Additional risk adjustments | 0.0% | 0.5% |
| Cost of equity | 13.80% | 19.00% |
| Tax rate | 25.20% | 25.60% |
| Debt/Equity ratio | 3 | 3 |
| Cost of debt | 7.70% | 23.90% |
| After-tax WACC | 7.8% | 18.1% |
| Selected WACC | 12.9% | |
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 M&MFIN.NS:
cost_of_equity (16.40%) = risk_free_rate (7.15%) + equity_risk_premium (8.80%) * adjusted_beta (0.84) + 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.