The WACC of Firm Capital Mortgage Investment Corp (FC.TO) is 6.4%.
Range | Selected | |
Cost of equity | 6.5% - 8.6% | 7.55% |
Tax rate | 25.9% - 26.5% | 26.2% |
Cost of debt | 4.9% - 5.3% | 5.1% |
WACC | 5.6% - 7.2% | 6.4% |
Category | Low | High |
Long-term bond rate | 3.2% | 3.7% |
Equity market risk premium | 5.1% | 6.1% |
Adjusted beta | 0.66 | 0.74 |
Additional risk adjustments | 0.0% | 0.5% |
Cost of equity | 6.5% | 8.6% |
Tax rate | 25.9% | 26.5% |
Debt/Equity ratio | 0.44 | 0.44 |
Cost of debt | 4.9% | 5.3% |
After-tax WACC | 5.6% | 7.2% |
Selected WACC | 6.4% | |
Debt/Equity | Unlevered | |||
Peers | Company Name | ratio | Beta | beta |
FC.TO | Firm Capital Mortgage Investment Corp | 0.44 | 0.51 | 0.39 |
AI.TO | Atrium Mortgage Investment Corp | 0.61 | 0.55 | 0.38 |
GCBC | Greene County Bancorp Inc | 0.13 | 0.93 | 0.85 |
NECB | Northeast Community Bancorp Inc | 0 | 0.87 | 0.86 |
PBFS | Pioneer Bancorp Inc | 0 | 0.36 | 0.36 |
PCSB | PCSB Financial Corp | 0.04 | 0.58 | 0.56 |
RVSB | Riverview Bancorp Inc | 0.25 | 0.18 | 0.15 |
STND | Standard AVB Financial Corp | 0.04 | 0.22 | 0.22 |
SVBI | Severn Bancorp Inc | 0.12 | 0.79 | 0.73 |
WBBW | Westbury Bancorp Inc | 0.05 | -0.03 | -0.02 |
Low | High | |
Unlevered beta | 0.37 | 0.46 |
Relevered beta | 0.49 | 0.61 |
Adjusted relevered beta | 0.66 | 0.74 |
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 FC.TO:
cost_of_equity (7.55%) = risk_free_rate (3.45%) + equity_risk_premium (5.60%) * adjusted_beta (0.66) + 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.