The WACC of Reliance Communications Ltd (RCOM.NS) is 5.8%.
| Range | Selected | |
| Cost of equity | 13.80% - 129.10% | 71.45% |
| Tax rate | 1.70% - 3.30% | 2.50% |
| Cost of debt | 4.00% - 7.00% | 5.50% |
| WACC | 4.0% - 7.7% | 5.8% |
| Category | Low | High |
| Long-term bond rate | 6.9% | 7.4% |
| Equity market risk premium | 8.3% | 9.3% |
| Adjusted beta | 0.84 | 13.02 |
| Additional risk adjustments | 0.0% | 0.5% |
| Cost of equity | 13.80% | 129.10% |
| Tax rate | 1.70% | 3.30% |
| Debt/Equity ratio | 135.55 | 135.55 |
| Cost of debt | 4.00% | 7.00% |
| After-tax WACC | 4.0% | 7.7% |
| Selected WACC | 5.8% | |
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 RCOM.NS:
cost_of_equity (71.45%) = 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.