The WACC of Cineplex Inc (CGX.TO) is 9.9%.
| Range | Selected | |
| Cost of equity | 5.30% - 8.70% | 7.00% |
| Tax rate | 10.00% - 16.10% | 13.05% |
| Cost of debt | 5.70% - 20.20% | 12.95% |
| WACC | 5.2% - 14.7% | 9.9% |
| Category | Low | High |
| Long-term bond rate | 3.2% | 3.7% |
| Equity market risk premium | 5.1% | 6.1% |
| Adjusted beta | 0.33 | 0.65 |
| Additional risk adjustments | 0.5% | 1.0% |
| Cost of equity | 5.30% | 8.70% |
| Tax rate | 10.00% | 16.10% |
| Debt/Equity ratio | 2.77 | 2.77 |
| Cost of debt | 5.70% | 20.20% |
| After-tax WACC | 5.2% | 14.7% |
| Selected WACC | 9.9% | |
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 CGX.TO:
cost_of_equity (7.00%) = risk_free_rate (3.45%) + equity_risk_premium (5.60%) * adjusted_beta (0.33) + risk_adjustments (0.75%)
We include the risk adjustments, which range from 0% to 1%, to keep our WACC conservatives, especially for companies traded in developing markets.