L.TO WACC - Weighted Average Cost of Capital

The WACC of Loblaw Companies Ltd (L.TO) is 5.5%.

The Cost of Equity of Loblaw Companies Ltd (L.TO) is 6.05%.

The Cost of Debt of Loblaw Companies Ltd (L.TO) is 4.45%.

	Range	Selected
Cost of equity	5.00% - 7.10%	6.05%
Tax rate	24.90% - 25.50%	25.20%
Cost of debt	4.30% - 4.60%	4.45%
WACC	4.6% - 6.3%	5.5%

WACC

L.TO WACC calculation

Category	Low	High

Long-term bond rate	3.2%	3.7%
Equity market risk premium	5.1%	6.1%
Adjusted beta	0.36	0.49

Additional risk adjustments	0.0%	0.5%
Cost of equity	5.00%	7.10%

Tax rate	24.90%	25.50%
Debt/Equity ratio	0.29	0.29
Cost of debt	4.30%	4.60%

After-tax WACC	4.6%	6.3%


Selected WACC	5.5%

L.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 L.TO:

cost_of_equity (6.05%) = risk_free_rate (3.45%) + equity_risk_premium (5.60%) * adjusted_beta (0.36) + 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.