The WACC of Global Dividend Growers Income Fund (GDG.UN.TO) is 7.1%.
| Range | Selected | |
| Cost of equity | 5.70% - 8.70% | 7.20% |
| Tax rate | 3.30% - 19.40% | 11.35% |
| Cost of debt | 5.00% - 5.00% | 5.00% |
| WACC | 5.7% - 8.5% | 7.1% |
| Category | Low | High |
| Long-term bond rate | 3.4% | 3.9% |
| Equity market risk premium | 4.7% | 5.7% |
| Adjusted beta | 0.5 | 0.75 |
| Additional risk adjustments | 0.0% | 0.5% |
| Cost of equity | 5.70% | 8.70% |
| Tax rate | 3.30% | 19.40% |
| Debt/Equity ratio | 0.03 | 0.03 |
| Cost of debt | 5.00% | 5.00% |
| After-tax WACC | 5.7% | 8.5% |
| Selected WACC | 7.1% | |
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 GDG.UN.TO:
cost_of_equity (7.20%) = risk_free_rate (3.65%) + equity_risk_premium (5.20%) * adjusted_beta (0.5) + 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.