The WACC of Vardhman Special Steels Ltd (VSSL.NS) is 16.3%.
Range | Selected | |
Cost of equity | 15.00% - 18.40% | 16.70% |
Tax rate | 25.50% - 28.70% | 27.10% |
Cost of debt | 7.80% - 13.60% | 10.70% |
WACC | 14.6% - 18.0% | 16.3% |
Category | Low | High |
Long-term bond rate | 6.9% | 7.4% |
Equity market risk premium | 8.3% | 9.3% |
Adjusted beta | 0.98 | 1.13 |
Additional risk adjustments | 0.0% | 0.5% |
Cost of equity | 15.00% | 18.40% |
Tax rate | 25.50% | 28.70% |
Debt/Equity ratio | 0.04 | 0.04 |
Cost of debt | 7.80% | 13.60% |
After-tax WACC | 14.6% | 18.0% |
Selected WACC | 16.3% | |
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 VSSL.NS:
cost_of_equity (16.70%) = risk_free_rate (7.15%) + equity_risk_premium (8.80%) * adjusted_beta (0.98) + 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.