CVE.TO WACC - Weighted Average Cost of Capital

The WACC of Cenovus Energy Inc (CVE.TO) is 8.1%.

The Cost of Equity of Cenovus Energy Inc (CVE.TO) is 9.20%.

The Cost of Debt of Cenovus Energy Inc (CVE.TO) is 5.00%.

	Range	Selected
Cost of equity	7.50% - 10.90%	9.20%
Tax rate	24.80% - 26.20%	25.50%
Cost of debt	5.00% - 5.00%	5.00%
WACC	6.7% - 9.4%	8.1%

WACC

CVE.TO WACC calculation

Category	Low	High

Long-term bond rate	3.2%	3.7%
Equity market risk premium	5.1%	6.1%
Adjusted beta	0.85	1.1

Additional risk adjustments	0.0%	0.5%
Cost of equity	7.50%	10.90%

Tax rate	24.80%	26.20%
Debt/Equity ratio	0.25	0.25
Cost of debt	5.00%	5.00%

After-tax WACC	6.7%	9.4%


Selected WACC	8.1%

CVE.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 CVE.TO:

cost_of_equity (9.20%) = risk_free_rate (3.45%) + equity_risk_premium (5.60%) * adjusted_beta (0.85) + 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.