The WACC of South Indian Bank Ltd (SOUTHBANK.NS) is 13.0%.
Range | Selected | |
Cost of equity | 16.50% - 20.20% | 18.35% |
Tax rate | 29.40% - 30.00% | 29.70% |
Cost of debt | 5.00% - 5.00% | 5.00% |
WACC | 11.9% - 14.2% | 13.0% |
Category | Low | High |
Long-term bond rate | 6.9% | 7.4% |
Equity market risk premium | 8.3% | 9.3% |
Adjusted beta | 1.16 | 1.33 |
Additional risk adjustments | 0.0% | 0.5% |
Cost of equity | 16.50% | 20.20% |
Tax rate | 29.40% | 30.00% |
Debt/Equity ratio | 0.56 | 0.56 |
Cost of debt | 5.00% | 5.00% |
After-tax WACC | 11.9% | 14.2% |
Selected WACC | 13.0% | |
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 SOUTHBANK.NS:
cost_of_equity (18.35%) = risk_free_rate (7.15%) + equity_risk_premium (8.80%) * adjusted_beta (1.16) + 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.