ARX.TO WACC - Weighted Average Cost of Capital

The WACC of ARC Resources Ltd (ARX.TO) is 7.9%.

The Cost of Equity of ARC Resources Ltd (ARX.TO) is 8.40%.

The Cost of Debt of ARC Resources Ltd (ARX.TO) is 5.65%.

	Range	Selected
Cost of equity	7.20% - 9.60%	8.40%
Tax rate	22.60% - 22.70%	22.65%
Cost of debt	4.00% - 7.30%	5.65%
WACC	6.7% - 9.1%	7.9%

WACC

ARX.TO WACC calculation

Category	Low	High

Long-term bond rate	3.2%	3.7%
Equity market risk premium	5.1%	6.1%
Adjusted beta	0.8	0.89

Additional risk adjustments	0.0%	0.5%
Cost of equity	7.20%	9.60%

Tax rate	22.60%	22.70%
Debt/Equity ratio	0.14	0.14
Cost of debt	4.00%	7.30%

After-tax WACC	6.7%	9.1%


Selected WACC	7.9%

ARX.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 ARX.TO:

cost_of_equity (8.40%) = risk_free_rate (3.45%) + equity_risk_premium (5.60%) * adjusted_beta (0.8) + 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.