The WACC of Cardinal Energy Ltd (Alberta) (CJ.TO) is 9.3%.
| Range | Selected | |
| Cost of equity | 8.30% - 11.00% | 9.65% |
| Tax rate | 15.50% - 23.70% | 19.60% |
| Cost of debt | 4.00% - 9.80% | 6.90% |
| WACC | 8.0% - 10.7% | 9.3% |
| Category | Low | High |
| Long-term bond rate | 3.2% | 3.7% |
| Equity market risk premium | 5.1% | 6.1% |
| Adjusted beta | 1.02 | 1.12 |
| Additional risk adjustments | 0.0% | 0.5% |
| Cost of equity | 8.30% | 11.00% |
| Tax rate | 15.50% | 23.70% |
| Debt/Equity ratio | 0.08 | 0.08 |
| Cost of debt | 4.00% | 9.80% |
| After-tax WACC | 8.0% | 10.7% |
| Selected WACC | 9.3% | |
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 CJ.TO:
cost_of_equity (9.65%) = risk_free_rate (3.45%) + equity_risk_premium (5.60%) * adjusted_beta (1.02) + 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.