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

The WACC of Fairfax India Holdings Corp (FIH.U.TO) is 8.3%.

The Cost of Equity of Fairfax India Holdings Corp (FIH.U.TO) is 9.60%.

The Cost of Debt of Fairfax India Holdings Corp (FIH.U.TO) is 4.25%.

	Range	Selected
Cost of equity	8.20% - 11.00%	9.60%
Tax rate	12.00% - 15.60%	13.80%
Cost of debt	4.00% - 4.50%	4.25%
WACC	7.2% - 9.4%	8.3%

WACC

FIH.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	1.1	1.22

Additional risk adjustments	0.0%	0.5%
Cost of equity	8.20%	11.00%

Tax rate	12.00%	15.60%
Debt/Equity ratio	0.29	0.29
Cost of debt	4.00%	4.50%

After-tax WACC	7.2%	9.4%


Selected WACC	8.3%

FIH.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 FIH.U.TO:

cost_of_equity (9.60%) = risk_free_rate (3.45%) + equity_risk_premium (5.10%) * adjusted_beta (1.1) + 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.