FFH.TO
Fairfax Financial Holdings Ltd
Price:  
2,195.41 
CAD
Volume:  
16,709.00
Canada | Insurance
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FFH.TO WACC - Weighted Average Cost of Capital

The WACC of Fairfax Financial Holdings Ltd (FFH.TO) is 7.2%.

The Cost of Equity of Fairfax Financial Holdings Ltd (FFH.TO) is 8.30%.
The Cost of Debt of Fairfax Financial Holdings Ltd (FFH.TO) is 5.00%.

Range Selected
Cost of equity 7.10% - 9.50% 8.30%
Tax rate 20.00% - 23.10% 21.55%
Cost of debt 5.00% - 5.00% 5.00%
WACC 6.3% - 8.1% 7.2%
WACC

FFH.TO WACC calculation

Category Low High
Long-term bond rate 3.2% 3.7%
Equity market risk premium 5.1% 6.1%
Adjusted beta 0.77 0.88
Additional risk adjustments 0.0% 0.5%
Cost of equity 7.10% 9.50%
Tax rate 20.00% 23.10%
Debt/Equity ratio 0.34 0.34
Cost of debt 5.00% 5.00%
After-tax WACC 6.3% 8.1%
Selected WACC 7.2%

FFH.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 FFH.TO:

cost_of_equity (8.30%) = risk_free_rate (3.45%) + equity_risk_premium (5.60%) * adjusted_beta (0.77) + 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.