FRU.TO WACC - Weighted Average Cost of Capital

The WACC of Freehold Royalties Ltd (FRU.TO) is 8.5%.

The Cost of Equity of Freehold Royalties Ltd (FRU.TO) is 9.25%.

The Cost of Debt of Freehold Royalties Ltd (FRU.TO) is 5.25%.

	Range	Selected
Cost of equity	7.30% - 11.20%	9.25%
Tax rate	22.10% - 22.70%	22.40%
Cost of debt	4.00% - 6.50%	5.25%
WACC	6.7% - 10.4%	8.5%

WACC

FRU.TO WACC calculation

Category	Low	High

Long-term bond rate	3.2%	3.7%
Equity market risk premium	5.1%	6.1%
Adjusted beta	0.81	1.15

Additional risk adjustments	0.0%	0.5%
Cost of equity	7.30%	11.20%

Tax rate	22.10%	22.70%
Debt/Equity ratio	0.15	0.15
Cost of debt	4.00%	6.50%

After-tax WACC	6.7%	10.4%


Selected WACC	8.5%

FRU.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 FRU.TO:

cost_of_equity (9.25%) = risk_free_rate (3.45%) + equity_risk_premium (5.60%) * adjusted_beta (0.81) + 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.