The WACC of Setco Automotive Ltd (SETCO.NS) is 25.0%.
| Range | Selected | |
| Cost of equity | 25.40% - 31.50% | 28.45% |
| Tax rate | 2.70% - 3.60% | 3.15% |
| Cost of debt | 23.10% - 26.90% | 25.00% |
| WACC | 23.0% - 27.0% | 25.0% |
| Category | Low | High |
| Long-term bond rate | 6.9% | 7.4% |
| Equity market risk premium | 8.3% | 9.3% |
| Adjusted beta | 2.23 | 2.54 |
| Additional risk adjustments | 0.0% | 0.5% |
| Cost of equity | 25.40% | 31.50% |
| Tax rate | 2.70% | 3.60% |
| Debt/Equity ratio | 4.11 | 4.11 |
| Cost of debt | 23.10% | 26.90% |
| After-tax WACC | 23.0% | 27.0% |
| Selected WACC | 25.0% | |
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 SETCO.NS:
cost_of_equity (28.45%) = risk_free_rate (7.15%) + equity_risk_premium (8.80%) * adjusted_beta (2.23) + 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.