The WACC of Shriram EPC Ltd (SHRIRAMEPC.NS) is 10.7%.
| Range | Selected | |
| Cost of equity | 10.20% - 14.70% | 12.45% |
| Tax rate | 2.00% - 15.90% | 8.95% |
| Cost of debt | 7.00% - 13.10% | 10.05% |
| WACC | 8.6% - 12.9% | 10.7% |
| Category | Low | High |
| Long-term bond rate | 7.5% | 8.0% |
| Equity market risk premium | 6.9% | 7.9% |
| Adjusted beta | 0.39 | 0.79 |
| Additional risk adjustments | 0.0% | 0.5% |
| Cost of equity | 10.20% | 14.70% |
| Tax rate | 2.00% | 15.90% |
| Debt/Equity ratio | 1 | 1 |
| Cost of debt | 7.00% | 13.10% |
| After-tax WACC | 8.6% | 12.9% |
| Selected WACC | 10.7% | |
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 SHRIRAMEPC.NS:
cost_of_equity (12.45%) = risk_free_rate (7.75%) + equity_risk_premium (7.40%) * adjusted_beta (0.39) + 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.