The WACC of Shriram Transport Finance Company Ltd (SRTRANSFIN.NS) is 6.9%.
| Range | Selected | |
| Cost of equity | 16.00% - 19.30% | 17.65% |
| Tax rate | 25.60% - 28.80% | 27.20% |
| Cost of debt | 5.00% - 5.00% | 5.00% |
| WACC | 6.6% - 7.2% | 6.9% |
| Category | Low | High |
| Long-term bond rate | 7.4% | 7.9% |
| Equity market risk premium | 6.9% | 7.9% |
| Adjusted beta | 1.24 | 1.37 |
| Additional risk adjustments | 0.0% | 0.5% |
| Cost of equity | 16.00% | 19.30% |
| Tax rate | 25.60% | 28.80% |
| Debt/Equity ratio | 3.33 | 3.33 |
| Cost of debt | 5.00% | 5.00% |
| After-tax WACC | 6.6% | 7.2% |
| Selected WACC | 6.9% | |
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 SRTRANSFIN.NS:
cost_of_equity (17.65%) = risk_free_rate (7.65%) + equity_risk_premium (7.40%) * adjusted_beta (1.24) + 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.