CFW.TO WACC - Weighted Average Cost of Capital

The WACC of Calfrac Well Services Ltd (CFW.TO) is 7.2%.

The Cost of Equity of Calfrac Well Services Ltd (CFW.TO) is 8.70%.

The Cost of Debt of Calfrac Well Services Ltd (CFW.TO) is 8.15%.

	Range	Selected
Cost of equity	7.40% - 10.00%	8.70%
Tax rate	25.90% - 26.50%	26.20%
Cost of debt	7.90% - 8.40%	8.15%
WACC	6.6% - 7.9%	7.2%

WACC

CFW.TO WACC calculation

Category	Low	High

Long-term bond rate	3.2%	3.7%
Equity market risk premium	5.1%	6.1%
Adjusted beta	0.83	0.96

Additional risk adjustments	0.0%	0.5%
Cost of equity	7.40%	10.00%

Tax rate	25.90%	26.50%
Debt/Equity ratio	1.21	1.21
Cost of debt	7.90%	8.40%

After-tax WACC	6.6%	7.9%


Selected WACC	7.2%

CFW.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 CFW.TO:

cost_of_equity (8.70%) = risk_free_rate (3.45%) + equity_risk_premium (5.60%) * adjusted_beta (0.83) + 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.