TATAPOWER.NS WACC - Weighted Average Cost of Capital

The WACC of Tata Power Company Ltd (TATAPOWER.NS) is 12.0%.

The Cost of Equity of Tata Power Company Ltd (TATAPOWER.NS) is 15.10%.

The Cost of Debt of Tata Power Company Ltd (TATAPOWER.NS) is 8.45%.

	Range	Selected
Cost of equity	13.80% - 16.40%	15.10%
Tax rate	24.90% - 25.30%	25.10%
Cost of debt	8.30% - 8.60%	8.45%
WACC	11.1% - 12.9%	12.0%

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	0.84	0.92

Additional risk adjustments	0.0%	0.5%
Cost of equity	13.80%	16.40%

Tax rate	24.90%	25.30%
Debt/Equity ratio	0.55	0.55
Cost of debt	8.30%	8.60%

After-tax WACC	11.1%	12.9%


Selected WACC	12.0%

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 (15.10%) = risk_free_rate (7.15%) + equity_risk_premium (8.80%) * adjusted_beta (0.84) + 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.