The WACC of Soma Textiles & Industries Ltd (SOMATEX.NS) is 14.1%.
| Range | Selected | |
| Cost of equity | 12.30% - 15.70% | 14.00% |
| Tax rate | 3.30% - 5.40% | 4.35% |
| Cost of debt | 7.50% - 38.60% | 23.05% |
| WACC | 12.2% - 16.1% | 14.1% |
| Category | Low | High |
| Long-term bond rate | 6.9% | 7.4% |
| Equity market risk premium | 8.3% | 9.3% |
| Adjusted beta | 0.65 | 0.84 |
| Additional risk adjustments | 0.0% | 0.5% |
| Cost of equity | 12.30% | 15.70% |
| Tax rate | 3.30% | 5.40% |
| Debt/Equity ratio | 0.02 | 0.02 |
| Cost of debt | 7.50% | 38.60% |
| After-tax WACC | 12.2% | 16.1% |
| Selected WACC | 14.1% | |
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 SOMATEX.NS:
cost_of_equity (14.00%) = risk_free_rate (7.15%) + equity_risk_premium (8.80%) * adjusted_beta (0.65) + 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.