The WACC of Algonquin Power & Utilities Corp (AQN.TO) is 4.5%.
Range | Selected | |
Cost of equity | 5.7% - 7.6% | 6.65% |
Tax rate | 25.0% - 42.2% | 33.6% |
Cost of debt | 4.6% - 4.8% | 4.7% |
WACC | 4.4% - 4.7% | 4.5% |
Category | Low | High |
Long-term bond rate | 3.2% | 3.7% |
Equity market risk premium | 5.1% | 6.1% |
Adjusted beta | 0.51 | 0.56 |
Additional risk adjustments | 0.0% | 0.5% |
Cost of equity | 5.7% | 7.6% |
Tax rate | 25.0% | 42.2% |
Debt/Equity ratio | 1.47 | 1.47 |
Cost of debt | 4.6% | 4.8% |
After-tax WACC | 4.4% | 4.7% |
Selected WACC | 4.5% | |
Debt/Equity | Unlevered | |||
Peers | Company Name | ratio | Beta | beta |
AQN.TO | Algonquin Power & Utilities Corp | 1.47 | 0.76 | 0.38 |
ACO.X.TO | Atco Ltd | 2.11 | 0.07 | 0.03 |
AEE | Ameren Corp | 0.7 | 0.31 | 0.21 |
AVA | Avista Corp | 1.02 | 0 | 0 |
BKH | Black Hills Corp | 1.06 | 0.25 | 0.14 |
CU.TO | Canadian Utilities Ltd | 1.41 | 0.24 | 0.12 |
MDU | MDU Resources Group Inc | 0.66 | 0.87 | 0.6 |
NI | NiSource Inc | 0.73 | 0.4 | 0.27 |
NWE | NorthWestern Corp | 0.97 | 0.11 | 0.07 |
UTL | Unitil Corp | 0.9 | 0.22 | 0.13 |
Low | High | |
Unlevered beta | 0.13 | 0.17 |
Relevered beta | 0.27 | 0.34 |
Adjusted relevered beta | 0.51 | 0.56 |
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 AQN.TO:
cost_of_equity (6.65%) = risk_free_rate (3.45%) + equity_risk_premium (5.60%) * adjusted_beta (0.51) + 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.