FIH.U.TO WACC - Weighted Average Cost of Capital
The WACC of Fairfax India Holdings Corp (FIH.U.TO) is 6.2%.
| Range | Selected | |
| Cost of equity | 5.6% - 8.0% | 6.8% |
| Tax rate | 7.0% - 10.4% | 8.7% |
| Cost of debt | 4.0% - 4.6% | 4.3% |
| WACC | 5.2% - 7.2% | 6.2% |
| Category | Low | High |
| Long-term bond rate | 3.2% | 3.7% |
| Equity market risk premium | 4.6% | 5.6% |
| Adjusted beta | 0.53 | 0.69 |
| Additional risk adjustments | 0.0% | 0.5% |
| Cost of equity | 5.6% | 8.0% |
| Tax rate | 7.0% | 10.4% |
| Debt/Equity ratio | 0.27 | 0.27 |
| Cost of debt | 4.0% | 4.6% |
| After-tax WACC | 5.2% | 7.2% |
| Selected WACC | 6.2% | |
| Debt/Equity | Unlevered | |||
| Peers | Company Name | ratio | Beta | beta |
| FIH.U.TO | Fairfax India Holdings Corp | 0.27 | 1.33 | 1.07 |
| AC | Associated Capital Group Inc | 0.01 | 0.69 | 0.69 |
| BBDC | Barings BDC Inc | 1.44 | 0.56 | 0.24 |
| CCAP | Crescent Capital BDC Inc | 1.57 | 0.45 | 0.18 |
| CGBD | TCG BDC Inc | 0.94 | -0.02 | -0.01 |
| CVG.TO | Clairvest Group Inc | 0.01 | 0.23 | 0.23 |
| EIT.UN.TO | Canoe EIT Income Fund | 0.09 | 1.18 | 1.08 |
| NEWT | Newtek Business Services Corp | 5.59 | 0.07 | 0.01 |
| OCSL | Oaktree Specialty Lending Corp | 1.3 | 0.58 | 0.26 |
| SEC.TO | Senvest Capital Inc | 0.02 | 1.16 | 1.14 |
| Low | High | |
| Unlevered beta | 0.23 | 0.43 |
| Relevered beta | 0.3 | 0.54 |
| Adjusted relevered beta | 0.53 | 0.69 |
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 (6.80%) = risk_free_rate (3.45%) + equity_risk_premium (5.10%) * adjusted_beta (0.53) + 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.