TATAPOWER.NS WACC - Weighted Average Cost of Capital

The WACC of Tata Power Company Ltd (TATAPOWER.NS) is 12.4%.

The Cost of Equity of Tata Power Company Ltd (TATAPOWER.NS) is 15.25%.

The Cost of Debt of Tata Power Company Ltd (TATAPOWER.NS) is 8.05%.

	Range	Selected
Cost of equity	12.60% - 17.90%	15.25%
Tax rate	25.30% - 27.30%	26.30%
Cost of debt	8.00% - 8.10%	8.05%
WACC	10.6% - 14.2%	12.4%

WACC

TATAPOWER.NS WACC calculation

Category	Low	High

Long-term bond rate	6.9%	7.4%
Equity market risk premium	8.3%	9.3%
Adjusted beta	0.69	1.08

Additional risk adjustments	0.0%	0.5%
Cost of equity	12.60%	17.90%

Tax rate	25.30%	27.30%
Debt/Equity ratio	0.44	0.44
Cost of debt	8.00%	8.10%

After-tax WACC	10.6%	14.2%


Selected WACC	12.4%

TATAPOWER.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 TATAPOWER.NS:

cost_of_equity (15.25%) = risk_free_rate (7.15%) + equity_risk_premium (8.80%) * adjusted_beta (0.69) + 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.