The WACC of Splendid Metal Products Ltd (SMPL.NS) is 5.5%.
| Range | Selected | |
| Cost of equity | 166.30% - 377.00% | 271.65% |
| Tax rate | 13.00% - 16.90% | 14.95% |
| Cost of debt | 4.00% - 7.00% | 5.50% |
| WACC | 4.0% - 7.0% | 5.5% |
| Category | Low | High |
| Long-term bond rate | 7.5% | 8.0% |
| Equity market risk premium | 6.9% | 7.9% |
| Adjusted beta | 22.95 | 46.53 |
| Additional risk adjustments | 0.0% | 0.5% |
| Cost of equity | 166.30% | 377.00% |
| Tax rate | 13.00% | 16.90% |
| Debt/Equity ratio | 323.4 | 323.4 |
| Cost of debt | 4.00% | 7.00% |
| After-tax WACC | 4.0% | 7.0% |
| Selected WACC | 5.5% | |
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 SMPL.NS:
cost_of_equity (271.65%) = risk_free_rate (7.75%) + equity_risk_premium (7.40%) * adjusted_beta (22.95) + 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.