AC.TO
Air Canada
Price:  
18.06 
CAD
Volume:  
2,569,319.00
Canada | Airlines
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AC.TO WACC - Weighted Average Cost of Capital

The WACC of Air Canada (AC.TO) is 8.2%.

The Cost of Equity of Air Canada (AC.TO) is 13.40%.
The Cost of Debt of Air Canada (AC.TO) is 6.55%.

Range Selected
Cost of equity 10.50% - 16.30% 13.40%
Tax rate 7.40% - 10.30% 8.85%
Cost of debt 4.70% - 8.40% 6.55%
WACC 6.2% - 10.1% 8.2%
WACC

AC.TO WACC calculation

Category Low High
Long-term bond rate 3.2% 3.7%
Equity market risk premium 5.1% 6.1%
Adjusted beta 1.43 1.99
Additional risk adjustments 0.0% 0.5%
Cost of equity 10.50% 16.30%
Tax rate 7.40% 10.30%
Debt/Equity ratio 2.37 2.37
Cost of debt 4.70% 8.40%
After-tax WACC 6.2% 10.1%
Selected WACC 8.2%

AC.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 AC.TO:

cost_of_equity (13.40%) = risk_free_rate (3.45%) + equity_risk_premium (5.60%) * adjusted_beta (1.43) + 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.