IDG.TO WACC - Weighted Average Cost of Capital
The WACC of Indigo Books and Music Inc (IDG.TO) is 8.4%.
| Range | Selected | |
| Cost of equity | 14.3% - 29.4% | 21.85% |
| Tax rate | 1.2% - 11.4% | 6.3% |
| Cost of debt | 7.0% - 7.0% | 7% |
| WACC | 7.8% - 9.0% | 8.4% |
| Category | Low | High |
| Long-term bond rate | 3.2% | 3.7% |
| Equity market risk premium | 5.1% | 6.1% |
| Adjusted beta | 2.19 | 4.14 |
| Additional risk adjustments | 0.0% | 0.5% |
| Cost of equity | 14.3% | 29.4% |
| Tax rate | 1.2% | 11.4% |
| Debt/Equity ratio | 7.22 | 7.22 |
| Cost of debt | 7.0% | 7.0% |
| After-tax WACC | 7.8% | 9.0% |
| Selected WACC | 8.4% | |
| Debt/Equity | Unlevered | |||
| Peers | Company Name | ratio | Beta | beta |
| IDG.TO | Indigo Books and Music Inc | 7.22 | -0.8 | -0.1 |
| BCI.TO | New Look Vision Group Inc | 0.47 | 1.05 | 0.72 |
| BGFV | Big 5 Sporting Goods Corp | 0.83 | 0.69 | 0.38 |
| BNED | Barnes & Noble Education Inc | 0.53 | 1.52 | 1 |
| EYE | National Vision Holdings Inc | 0.23 | 1 | 0.81 |
| HIBB | Hibbett Sports Inc | 0.05 | 1.91 | 1.83 |
| RTON | Right On Brands Inc | 0.4 | 0.96 | 0.69 |
| SPWH | Sportsmans Warehouse Holdings Inc | 1.3 | -0.34 | -0.15 |
| TCS | Container Store Group Inc | 256.2 | 1.69 | 0.01 |
| WCRS | Western Capital Resources Inc | 0.04 | 0.3 | 0.29 |
| Low | High | |
| Unlevered beta | 0.34 | 0.7 |
| Relevered beta | 2.78 | 5.69 |
| Adjusted relevered beta | 2.19 | 4.14 |
IDG.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 IDG.TO:
cost_of_equity (21.85%) = risk_free_rate (3.45%) + equity_risk_premium (5.60%) * adjusted_beta (2.19) + 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.