The WACC of Sundaram Clayton Ltd (SUNCLAYLTD.NS) is 10.0%.
| Range | Selected | |
| Cost of equity | 22.50% - 26.90% | 24.70% |
| Tax rate | 30.60% - 31.60% | 31.10% |
| Cost of debt | 4.00% - 7.90% | 5.95% |
| WACC | 8.4% - 11.6% | 10.0% |
| Category | Low | High |
| Long-term bond rate | 7.2% | 7.7% |
| Equity market risk premium | 8.8% | 9.8% |
| Adjusted beta | 1.73 | 1.9 |
| Additional risk adjustments | 0.0% | 0.5% |
| Cost of equity | 22.50% | 26.90% |
| Tax rate | 30.60% | 31.60% |
| Debt/Equity ratio | 2.5 | 2.5 |
| Cost of debt | 4.00% | 7.90% |
| After-tax WACC | 8.4% | 11.6% |
| Selected WACC | 10.0% | |
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 SUNCLAYLTD.NS:
cost_of_equity (24.70%) = risk_free_rate (7.45%) + equity_risk_premium (9.30%) * adjusted_beta (1.73) + 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.