The WACC of Newgen Software Technologies Ltd (NEWGEN.NS) is 14.8%.
| Range | Selected | |
| Cost of equity | 11.60% - 18.00% | 14.80% |
| Tax rate | 19.00% - 20.20% | 19.60% |
| Cost of debt | 4.00% - 7.50% | 5.75% |
| WACC | 11.6% - 18.0% | 14.8% |
| Category | Low | High |
| Long-term bond rate | 6.9% | 7.4% |
| Equity market risk premium | 8.3% | 9.3% |
| Adjusted beta | 0.57 | 1.09 |
| Additional risk adjustments | 0.0% | 0.5% |
| Cost of equity | 11.60% | 18.00% |
| Tax rate | 19.00% | 20.20% |
| Debt/Equity ratio | 0 | 0 |
| Cost of debt | 4.00% | 7.50% |
| After-tax WACC | 11.6% | 18.0% |
| Selected WACC | 14.8% | |
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 NEWGEN.NS:
cost_of_equity (14.80%) = risk_free_rate (7.15%) + equity_risk_premium (8.80%) * adjusted_beta (0.57) + 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.