FTS.TO WACC - Weighted Average Cost of Capital
The WACC of Fortis Inc (FTS.TO) is 5.3%.
| Range | Selected | |
| Cost of equity | 5.4% - 7.0% | 6.2% |
| Tax rate | 15.3% - 16.0% | 15.65% |
| Cost of debt | 4.2% - 6.3% | 5.25% |
| WACC | 4.5% - 6.2% | 5.3% |
| Category | Low | High |
| Long-term bond rate | 3.2% | 3.7% |
| Equity market risk premium | 5.1% | 6.1% |
| Adjusted beta | 0.44 | 0.47 |
| Additional risk adjustments | 0.0% | 0.5% |
| Cost of equity | 5.4% | 7.0% |
| Tax rate | 15.3% | 16.0% |
| Debt/Equity ratio | 1.04 | 1.04 |
| Cost of debt | 4.2% | 6.3% |
| After-tax WACC | 4.5% | 6.2% |
| Selected WACC | 5.3% | |
| Debt/Equity | Unlevered | |||
| Peers | Company Name | ratio | Beta | beta |
| FTS.TO | Fortis Inc | 1.04 | 0.3 | 0.16 |
| AGR | Avangrid Inc | 0.86 | -0.28 | -0.16 |
| EMA.TO | Emera Inc | 1.08 | -0.2 | -0.11 |
| ES | Eversource Energy | 1.25 | 0.12 | 0.06 |
| ETR | Entergy Corp | 0.79 | 0.33 | 0.2 |
| EVRG | Evergy Inc | 0.9 | 0.21 | 0.12 |
| FE | FirstEnergy Corp | 1.04 | 0.12 | 0.07 |
| H.TO | Hydro One Ltd | 0.61 | 0.16 | 0.11 |
| NRG | NRG Energy Inc | 0.34 | 2.06 | 1.61 |
| PPL | PPL Corp | 0.68 | 0.17 | 0.11 |
| Low | High | |
| Unlevered beta | 0.09 | 0.11 |
| Relevered beta | 0.16 | 0.21 |
| Adjusted relevered beta | 0.44 | 0.47 |
FTS.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 FTS.TO:
cost_of_equity (6.20%) = risk_free_rate (3.45%) + equity_risk_premium (5.60%) * adjusted_beta (0.44) + 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.