LUC.TO WACC - Weighted Average Cost of Capital

The WACC of Lucara Diamond Corp (LUC.TO) is 8.5%.

The Cost of Equity of Lucara Diamond Corp (LUC.TO) is 18.05%.

The Cost of Debt of Lucara Diamond Corp (LUC.TO) is 9.40%.

	Range	Selected
Cost of equity	14.60% - 21.50%	18.05%
Tax rate	29.10% - 41.60%	35.35%
Cost of debt	6.30% - 12.50%	9.40%
WACC	6.7% - 10.4%	8.5%

WACC

LUC.TO WACC calculation

Category	Low	High

Long-term bond rate	3.2%	3.7%
Equity market risk premium	5.1%	6.1%
Adjusted beta	2.24	2.84

Additional risk adjustments	0.0%	0.5%
Cost of equity	14.60%	21.50%

Tax rate	29.10%	41.60%
Debt/Equity ratio	3.62	3.62
Cost of debt	6.30%	12.50%

After-tax WACC	6.7%	10.4%


Selected WACC	8.5%

LUC.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 LUC.TO:

cost_of_equity (18.05%) = risk_free_rate (3.45%) + equity_risk_premium (5.60%) * adjusted_beta (2.24) + 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.