The WACC of NHPC Ltd (NHPC.NS) is 11.5%.
| Range | Selected | |
| Cost of equity | 11.70% - 15.00% | 13.35% |
| Tax rate | 19.70% - 21.00% | 20.35% |
| Cost of debt | 7.80% - 12.10% | 9.95% |
| WACC | 9.9% - 13.1% | 11.5% |
| Category | Low | High |
| Long-term bond rate | 6.9% | 7.4% |
| Equity market risk premium | 8.3% | 9.3% |
| Adjusted beta | 0.59 | 0.76 |
| Additional risk adjustments | 0.0% | 0.5% |
| Cost of equity | 11.70% | 15.00% |
| Tax rate | 19.70% | 21.00% |
| Debt/Equity ratio | 0.51 | 0.51 |
| Cost of debt | 7.80% | 12.10% |
| After-tax WACC | 9.9% | 13.1% |
| Selected WACC | 11.5% | |
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 NHPC.NS:
cost_of_equity (13.35%) = risk_free_rate (7.15%) + equity_risk_premium (8.80%) * adjusted_beta (0.59) + 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.