L.TO WACC - Weighted Average Cost of Capital

The WACC of Loblaw Companies Ltd (L.TO) is 6.1%.

The Cost of Equity of Loblaw Companies Ltd (L.TO) is 6.90%.

The Cost of Debt of Loblaw Companies Ltd (L.TO) is 4.40%.

	Range	Selected
Cost of equity	6.10% - 7.70%	6.90%
Tax rate	24.90% - 25.50%	25.20%
Cost of debt	4.30% - 4.50%	4.40%
WACC	5.4% - 6.7%	6.1%

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	0.57	0.58

Additional risk adjustments	0.0%	0.5%
Cost of equity	6.10%	7.70%

Tax rate	24.90%	25.50%
Debt/Equity ratio	0.29	0.29
Cost of debt	4.30%	4.50%

After-tax WACC	5.4%	6.7%


Selected WACC	6.1%

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 (6.90%) = risk_free_rate (3.45%) + equity_risk_premium (5.60%) * adjusted_beta (0.57) + 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.