HPS.A.TO
Hammond Power Solutions Inc
Price:  
126.20 
CAD
Volume:  
72,365.00
Canada | Electrical Equipment
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HPS.A.TO WACC - Weighted Average Cost of Capital

The WACC of Hammond Power Solutions Inc (HPS.A.TO) is 8.4%.

The Cost of Equity of Hammond Power Solutions Inc (HPS.A.TO) is 8.50%.
The Cost of Debt of Hammond Power Solutions Inc (HPS.A.TO) is 4.25%.

Range Selected
Cost of equity 6.90% - 10.10% 8.50%
Tax rate 25.50% - 27.20% 26.35%
Cost of debt 4.00% - 4.50% 4.25%
WACC 6.8% - 9.9% 8.4%
WACC

HPS.A.TO WACC calculation

Category Low High
Long-term bond rate 3.2% 3.7%
Equity market risk premium 5.1% 6.1%
Adjusted beta 0.74 0.97
Additional risk adjustments 0.0% 0.5%
Cost of equity 6.90% 10.10%
Tax rate 25.50% 27.20%
Debt/Equity ratio 0.02 0.02
Cost of debt 4.00% 4.50%
After-tax WACC 6.8% 9.9%
Selected WACC 8.4%

HPS.A.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 HPS.A.TO:

cost_of_equity (8.50%) = risk_free_rate (3.45%) + equity_risk_premium (5.60%) * adjusted_beta (0.74) + 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.