The WACC of Lions Bay Capital Inc (LBI.V) is 7.7%.
| Range | Selected | |
| Cost of equity | 6.00% - 10.00% | 8.00% |
| Tax rate | 11.30% - 16.30% | 13.80% |
| Cost of debt | 4.50% - 7.00% | 5.75% |
| WACC | 5.8% - 9.6% | 7.7% |
| Category | Low | High |
| Long-term bond rate | 3.9% | 4.4% |
| Equity market risk premium | 5.1% | 6.1% |
| Adjusted beta | 0.42 | 0.85 |
| Additional risk adjustments | 0.0% | 0.5% |
| Cost of equity | 6.00% | 10.00% |
| Tax rate | 11.30% | 16.30% |
| Debt/Equity ratio | 0.1 | 0.1 |
| Cost of debt | 4.50% | 7.00% |
| After-tax WACC | 5.8% | 9.6% |
| Selected WACC | 7.7% | |
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 LBI.V:
cost_of_equity (8.00%) = risk_free_rate (4.15%) + equity_risk_premium (5.60%) * adjusted_beta (0.42) + 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.