The WACC of Mahanagar Telephone Nigam Ltd (MTNL.NS) is 9.0%.
| Range | Selected | |
| Cost of equity | 16.80% - 23.20% | 20.00% |
| Tax rate | -% - 0.10% | 0.05% |
| Cost of debt | 7.00% - 8.90% | 7.95% |
| WACC | 7.9% - 10.2% | 9.0% |
| Category | Low | High |
| Long-term bond rate | 6.9% | 7.4% |
| Equity market risk premium | 8.3% | 9.3% |
| Adjusted beta | 1.19 | 1.65 |
| Additional risk adjustments | 0.0% | 0.5% |
| Cost of equity | 16.80% | 23.20% |
| Tax rate | -% | 0.10% |
| Debt/Equity ratio | 10.1 | 10.1 |
| Cost of debt | 7.00% | 8.90% |
| After-tax WACC | 7.9% | 10.2% |
| Selected WACC | 9.0% | |
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 MTNL.NS:
cost_of_equity (20.00%) = risk_free_rate (7.15%) + equity_risk_premium (8.80%) * adjusted_beta (1.19) + 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.