CUP.U.TO WACC - Weighted Average Cost of Capital

The WACC of Caribbean Utilities Company Ltd (CUP.U.TO) is 5.5%.

The Cost of Equity of Caribbean Utilities Company Ltd (CUP.U.TO) is 6.40%.

The Cost of Debt of Caribbean Utilities Company Ltd (CUP.U.TO) is 5.75%.

	Range	Selected
Cost of equity	5.30% - 7.50%	6.40%
Tax rate	25.90% - 26.50%	26.20%
Cost of debt	4.70% - 6.80%	5.75%
WACC	4.5% - 6.5%	5.5%

WACC

CUP.U.TO WACC calculation

Category	Low	High

Long-term bond rate	3.2%	3.7%
Equity market risk premium	4.6%	5.6%
Adjusted beta	0.47	0.6

Additional risk adjustments	0.0%	0.5%
Cost of equity	5.30%	7.50%

Tax rate	25.90%	26.50%
Debt/Equity ratio	0.71	0.71
Cost of debt	4.70%	6.80%

After-tax WACC	4.5%	6.5%


Selected WACC	5.5%

CUP.U.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 CUP.U.TO:

cost_of_equity (6.40%) = risk_free_rate (3.45%) + equity_risk_premium (5.10%) * adjusted_beta (0.47) + 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.