TATAMOTORS.NS WACC - Weighted Average Cost of Capital

The WACC of Tata Motors Ltd (TATAMOTORS.NS) is 14.0%.

The Cost of Equity of Tata Motors Ltd (TATAMOTORS.NS) is 17.65%.

The Cost of Debt of Tata Motors Ltd (TATAMOTORS.NS) is 7.05%.

	Range	Selected
Cost of equity	16.20% - 19.10%	17.65%
Tax rate	23.80% - 27.00%	25.40%
Cost of debt	6.20% - 7.90%	7.05%
WACC	12.8% - 15.2%	14.0%

WACC

TATAMOTORS.NS WACC calculation

Category	Low	High

Long-term bond rate	6.9%	7.4%
Equity market risk premium	8.3%	9.3%
Adjusted beta	1.12	1.21

Additional risk adjustments	0.0%	0.5%
Cost of equity	16.20%	19.10%

Tax rate	23.80%	27.00%
Debt/Equity ratio	0.42	0.42
Cost of debt	6.20%	7.90%

After-tax WACC	12.8%	15.2%


Selected WACC	14.0%

TATAMOTORS.NS's CAPM model and how its cost of Equity is calculated

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 TATAMOTORS.NS:

cost_of_equity (17.65%) = risk_free_rate (7.15%) + equity_risk_premium (8.80%) * adjusted_beta (1.12) + 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.