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.