LEMONTREE.NS WACC - Weighted Average Cost of Capital

The WACC of Lemon Tree Hotels Ltd (LEMONTREE.NS) is 12.9%.

The Cost of Equity of Lemon Tree Hotels Ltd (LEMONTREE.NS) is 14.45%.

The Cost of Debt of Lemon Tree Hotels Ltd (LEMONTREE.NS) is 7.75%.

	Range	Selected
Cost of equity	10.90% - 18.00%	14.45%
Tax rate	15.40% - 16.70%	16.05%
Cost of debt	6.90% - 8.60%	7.75%
WACC	9.9% - 15.9%	12.9%

WACC

LEMONTREE.NS WACC calculation

Category	Low	High

Long-term bond rate	6.9%	7.4%
Equity market risk premium	8.3%	9.3%
Adjusted beta	0.48	1.09

Additional risk adjustments	0.0%	0.5%
Cost of equity	10.90%	18.00%

Tax rate	15.40%	16.70%
Debt/Equity ratio	0.24	0.24
Cost of debt	6.90%	8.60%

After-tax WACC	9.9%	15.9%


Selected WACC	12.9%

LEMONTREE.NS's CAPM model and how its cost of Equity is calculated

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 LEMONTREE.NS:

cost_of_equity (14.45%) = risk_free_rate (7.15%) + equity_risk_premium (8.80%) * adjusted_beta (0.48) + 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.