AAV.TO
Advantage Oil & Gas Ltd
Price:  
11.48 
CAD
Volume:  
243,526
Canada | Oil, Gas & Consumable Fuels

AAV.TO WACC - Weighted Average Cost of Capital

The WACC of Advantage Oil & Gas Ltd (AAV.TO) is 7.8%.

The Cost of Equity of Advantage Oil & Gas Ltd (AAV.TO) is 8%.
The Cost of Debt of Advantage Oil & Gas Ltd (AAV.TO) is 9.55%.

RangeSelected
Cost of equity6.2% - 9.8%8%
Tax rate23.3% - 24.7%24%
Cost of debt7.4% - 11.7%9.55%
WACC6.0% - 9.5%7.8%
WACC

AAV.TO WACC calculation

CategoryLowHigh
Long-term bond rate3.2%3.7%
Equity market risk premium5.1%6.1%
Adjusted beta0.590.93
Additional risk adjustments0.0%0.5%
Cost of equity6.2%9.8%
Tax rate23.3%24.7%
Debt/Equity ratio
0.410.41
Cost of debt7.4%11.7%
After-tax WACC6.0%9.5%
Selected WACC7.8%

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.