The WACC of Tata Steel Long Products Ltd (TATASTLLP.NS) is 10.8%.
| Range | Selected | |
| Cost of equity | 25.80% - 32.80% | 29.30% |
| Tax rate | 8.30% - 16.20% | 12.25% |
| Cost of debt | 7.00% - 7.00% | 7.00% |
| WACC | 10.3% - 11.3% | 10.8% |
| Category | Low | High |
| Long-term bond rate | 6.9% | 7.4% |
| Equity market risk premium | 8.3% | 9.3% |
| Adjusted beta | 2.28 | 2.68 |
| Additional risk adjustments | 0.0% | 0.5% |
| Cost of equity | 25.80% | 32.80% |
| Tax rate | 8.30% | 16.20% |
| Debt/Equity ratio | 3.95 | 3.95 |
| Cost of debt | 7.00% | 7.00% |
| After-tax WACC | 10.3% | 11.3% |
| Selected WACC | 10.8% | |
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 TATASTLLP.NS:
cost_of_equity (29.30%) = risk_free_rate (7.15%) + equity_risk_premium (8.80%) * adjusted_beta (2.28) + 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.