The WACC of Atlas Corp (ATCO) is 7.5%.
| Range | Selected | |
| Cost of equity | 8.80% - 12.20% | 10.50% |
| Tax rate | 0.20% - 3.30% | 1.75% |
| Cost of debt | 4.10% - 6.90% | 5.50% |
| WACC | 6.1% - 9.0% | 7.5% |
| Category | Low | High |
| Long-term bond rate | 4.2% | 4.7% |
| Equity market risk premium | 5.0% | 6.0% |
| Adjusted beta | 0.93 | 1.16 |
| Additional risk adjustments | 0.0% | 0.5% |
| Cost of equity | 8.80% | 12.20% |
| Tax rate | 0.20% | 3.30% |
| Debt/Equity ratio | 1.38 | 1.38 |
| Cost of debt | 4.10% | 6.90% |
| After-tax WACC | 6.1% | 9.0% |
| Selected WACC | 7.5% | |
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 ATCO:
cost_of_equity (10.50%) = risk_free_rate (4.45%) + equity_risk_premium (5.50%) * adjusted_beta (0.93) + 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.