The WACC of United Nilgiri Tea Estates Company Ltd (UNITEDTEA.NS) is 11.1%.
| Range | Selected | |
| Cost of equity | 16.10% - 20.10% | 18.10% |
| Tax rate | 19.70% - 20.50% | 20.10% |
| Cost of debt | 5.00% - 5.00% | 5.00% |
| WACC | 10.1% - 12.0% | 11.1% |
| Category | Low | High |
| Long-term bond rate | 6.9% | 7.4% |
| Equity market risk premium | 8.3% | 9.3% |
| Adjusted beta | 1.12 | 1.31 |
| Additional risk adjustments | 0.0% | 0.5% |
| Cost of equity | 16.10% | 20.10% |
| Tax rate | 19.70% | 20.50% |
| Debt/Equity ratio | 1 | 1 |
| Cost of debt | 5.00% | 5.00% |
| After-tax WACC | 10.1% | 12.0% |
| Selected WACC | 11.1% | |
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 UNITEDTEA.NS:
cost_of_equity (18.10%) = 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.