HDI.TO WACC - Weighted Average Cost of Capital

The WACC of Hardwoods Distribution Inc (HDI.TO) is 8.1%.

The Cost of Equity of Hardwoods Distribution Inc (HDI.TO) is 12.25%.

The Cost of Debt of Hardwoods Distribution Inc (HDI.TO) is 4.40%.

	Range	Selected
Cost of equity	10.60% - 13.90%	12.25%
Tax rate	24.80% - 25.10%	24.95%
Cost of debt	4.00% - 4.80%	4.40%
WACC	7.1% - 9.2%	8.1%

WACC

HDI.TO WACC calculation

Category	Low	High

Long-term bond rate	3.6%	4.1%
Equity market risk premium	4.7%	5.7%
Adjusted beta	1.47	1.61

Additional risk adjustments	0.0%	0.5%
Cost of equity	10.60%	13.90%

Tax rate	24.80%	25.10%
Debt/Equity ratio	0.84	0.84
Cost of debt	4.00%	4.80%

After-tax WACC	7.1%	9.2%


Selected WACC	8.1%

HDI.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 HDI.TO:

cost_of_equity (12.25%) = risk_free_rate (3.85%) + equity_risk_premium (5.20%) * adjusted_beta (1.47) + 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.