CPA WACC - Weighted Average Cost of Capital
The WACC of Copa Holdings SA (CPA) is 7.4%.
| Range | Selected | |
| Cost of equity | 8.0% - 10.3% | 9.15% |
| Tax rate | 12.4% - 14.7% | 13.55% |
| Cost of debt | 4.0% - 4.6% | 4.3% |
| WACC | 6.6% - 8.3% | 7.4% |
| Category | Low | High |
| Long-term bond rate | 3.9% | 4.4% |
| Equity market risk premium | 4.6% | 5.6% |
| Adjusted beta | 0.89 | 0.98 |
| Additional risk adjustments | 0.0% | 0.5% |
| Cost of equity | 8.0% | 10.3% |
| Tax rate | 12.4% | 14.7% |
| Debt/Equity ratio | 0.46 | 0.46 |
| Cost of debt | 4.0% | 4.6% |
| After-tax WACC | 6.6% | 8.3% |
| Selected WACC | 7.4% | |
| Debt/Equity | Unlevered | |||
| Peers | Company Name | ratio | Beta | beta |
| CPA | Copa Holdings SA | 0.46 | 0.54 | 0.39 |
| ALGT | Allegiant Travel Co | 2.15 | 1.35 | 0.47 |
| CHR.TO | Chorus Aviation Inc | 0.97 | 1.05 | 0.57 |
| DAL | Delta Air Lines Inc | 0.52 | 1.15 | 0.8 |
| EIF.TO | Exchange Income Corp | 0.8 | 1.05 | 0.62 |
| HA | Hawaiian Holdings Inc | 1.76 | 1.81 | 0.72 |
| LUV | Southwest Airlines Co | 0.38 | 1.09 | 0.82 |
| MESA | Mesa Air Group Inc | 7.22 | 1.5 | 0.21 |
| UAL | United Airlines Holdings Inc | 1.02 | 1.27 | 0.68 |
| AIR.L | Air Partner PLC | 0.09 | 1.04 | 0.97 |
| Low | High | |
| Unlevered beta | 0.6 | 0.69 |
| Relevered beta | 0.84 | 0.97 |
| Adjusted relevered beta | 0.89 | 0.98 |
CPA'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 CPA:
cost_of_equity (9.15%) = risk_free_rate (4.15%) + equity_risk_premium (5.10%) * adjusted_beta (0.89) + 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.