The WACC of SMS Pharmaceuticals Ltd (SMSPHARMA.NS) is 13.2%.
| Range | Selected | |
| Cost of equity | 12.50% - 15.70% | 14.10% |
| Tax rate | 26.40% - 27.20% | 26.80% |
| Cost of debt | 7.90% - 8.00% | 7.95% |
| WACC | 11.8% - 14.6% | 13.2% |
| Category | Low | High |
| Long-term bond rate | 6.9% | 7.4% |
| Equity market risk premium | 8.3% | 9.3% |
| Adjusted beta | 0.68 | 0.84 |
| Additional risk adjustments | 0.0% | 0.5% |
| Cost of equity | 12.50% | 15.70% |
| Tax rate | 26.40% | 27.20% |
| Debt/Equity ratio | 0.13 | 0.13 |
| Cost of debt | 7.90% | 8.00% |
| After-tax WACC | 11.8% | 14.6% |
| Selected WACC | 13.2% | |
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 SMSPHARMA.NS:
cost_of_equity (14.10%) = risk_free_rate (7.15%) + equity_risk_premium (8.80%) * adjusted_beta (0.68) + 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.