FEC.TO WACC - Weighted Average Cost of Capital

The WACC of Frontera Energy Corp (FEC.TO) is 10.2%.

The Cost of Equity of Frontera Energy Corp (FEC.TO) is 6.20%.

The Cost of Debt of Frontera Energy Corp (FEC.TO) is 15.90%.

	Range	Selected
Cost of equity	5.10% - 7.30%	6.20%
Tax rate	2.30% - 19.90%	11.10%
Cost of debt	8.60% - 23.20%	15.90%
WACC	6.9% - 13.4%	10.2%

WACC

FEC.TO WACC calculation

Category	Low	High

Long-term bond rate	3.2%	3.7%
Equity market risk premium	5.1%	6.1%
Adjusted beta	-0.59	-0.31

Additional risk adjustments	5.0%	5.5%
Cost of equity	5.10%	7.30%

Tax rate	2.30%	19.90%
Debt/Equity ratio	1.21	1.21
Cost of debt	8.60%	23.20%

After-tax WACC	6.9%	13.4%


Selected WACC	10.2%

FEC.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 FEC.TO:

cost_of_equity (6.20%) = risk_free_rate (3.45%) + equity_risk_premium (5.60%) * adjusted_beta (-0.59) + risk_adjustments (5.25%)

We include the risk adjustments, which range from 0% to 1%, to keep our WACC conservatives, especially for companies traded in developing markets.