The WACC of Reliance Communications Ltd (RCOM.NS) is 6.0%.
| Range | Selected | |
| Cost of equity | 14.20% - 160.00% | 87.10% |
| Tax rate | 1.70% - 3.30% | 2.50% |
| Cost of debt | 4.00% - 7.00% | 5.50% |
| WACC | 4.0% - 8.0% | 6.0% |
| Category | Low | High |
| Long-term bond rate | 6.9% | 7.4% |
| Equity market risk premium | 8.3% | 9.3% |
| Adjusted beta | 0.89 | 16.34 |
| Additional risk adjustments | 0.0% | 0.5% |
| Cost of equity | 14.20% | 160.00% |
| Tax rate | 1.70% | 3.30% |
| Debt/Equity ratio | 126.55 | 126.55 |
| Cost of debt | 4.00% | 7.00% |
| After-tax WACC | 4.0% | 8.0% |
| Selected WACC | 6.0% | |
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 RCOM.NS:
cost_of_equity (87.10%) = risk_free_rate (7.15%) + equity_risk_premium (8.80%) * adjusted_beta (0.89) + 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.