AAV.TO WACC - Weighted Average Cost of Capital
The WACC of Advantage Oil & Gas Ltd (AAV.TO) is 7.8%.
| Range | Selected | |
| Cost of equity | 6.2% - 9.8% | 8% |
| Tax rate | 23.3% - 24.7% | 24% |
| Cost of debt | 7.4% - 11.7% | 9.55% |
| WACC | 6.0% - 9.5% | 7.8% |
| Category | Low | High |
| Long-term bond rate | 3.2% | 3.7% |
| Equity market risk premium | 5.1% | 6.1% |
| Adjusted beta | 0.59 | 0.93 |
| Additional risk adjustments | 0.0% | 0.5% |
| Cost of equity | 6.2% | 9.8% |
| Tax rate | 23.3% | 24.7% |
| Debt/Equity ratio | 0.41 | 0.41 |
| Cost of debt | 7.4% | 11.7% |
| After-tax WACC | 6.0% | 9.5% |
| Selected WACC | 7.8% | |
| Debt/Equity | Unlevered | |||
| Peers | Company Name | ratio | Beta | beta |
| AAV.TO | Advantage Oil & Gas Ltd | 0.41 | 1.5 | 1.14 |
| BATL | Battalion Oil Corp | 8.7 | 1.4 | 0.18 |
| CJ.TO | Cardinal Energy Ltd (Alberta) | 0.08 | 1.24 | 1.17 |
| CRBO | Carbon Energy Corp | 2.9 | -0.43 | -0.13 |
| GTE | Gran Tierra Energy Inc | 4.6 | 0.53 | 0.12 |
| KEL.TO | Kelt Exploration Ltd | 0.07 | 1.29 | 1.22 |
| NSLPQ | New Source Energy Partners LP | 452417.84 | -1.51 | 0 |
| REI | Ring Energy Inc | 2.29 | 1 | 0.36 |
| SBOW | SilverBow Resources Inc | 1.28 | 0.73 | 0.37 |
| TVE.TO | Tamarack Valley Energy Ltd | 0.3 | 1.68 | 1.37 |
| Low | High | |
| Unlevered beta | 0.29 | 0.68 |
| Relevered beta | 0.39 | 0.9 |
| Adjusted relevered beta | 0.59 | 0.93 |
AAV.TO'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 AAV.TO:
cost_of_equity (8.00%) = risk_free_rate (3.45%) + equity_risk_premium (5.60%) * adjusted_beta (0.59) + 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.