The WACC of Vedanta Ltd (VEDL.NS) is 15.2%.
Range | Selected | |
Cost of equity | 16.20% - 20.10% | 18.15% |
Tax rate | 25.20% - 28.20% | 26.70% |
Cost of debt | 9.10% - 13.10% | 11.10% |
WACC | 13.4% - 16.9% | 15.2% |
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 | 16.20% | 20.10% |
Tax rate | 25.20% | 28.20% |
Debt/Equity ratio | 0.42 | 0.42 |
Cost of debt | 9.10% | 13.10% |
After-tax WACC | 13.4% | 16.9% |
Selected WACC | 15.2% | |
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 VEDL.NS:
cost_of_equity (18.15%) = 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.