The WACC of Vasa Retail and Overseas Ltd (VASA.NS) is 7.5%.
| Range | Selected | |
| Cost of equity | 22.20% - 30.30% | 26.25% |
| Tax rate | -% - -% | -% |
| Cost of debt | 5.00% - 5.00% | 5.00% |
| WACC | 7.0% - 8.0% | 7.5% |
| Category | Low | High |
| Long-term bond rate | 6.9% | 7.4% |
| Equity market risk premium | 8.3% | 9.3% |
| Adjusted beta | 1.85 | 2.41 |
| Additional risk adjustments | 0.0% | 0.5% |
| Cost of equity | 22.20% | 30.30% |
| Tax rate | -% | -% |
| Debt/Equity ratio | 7.51 | 7.51 |
| Cost of debt | 5.00% | 5.00% |
| After-tax WACC | 7.0% | 8.0% |
| Selected WACC | 7.5% | |
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 VASA.NS:
cost_of_equity (26.25%) = risk_free_rate (7.15%) + equity_risk_premium (8.80%) * adjusted_beta (1.85) + 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.