The WACC of MDX PCL (MDX.BK) is 6.5%.
| Range | Selected | |
| Cost of equity | 5.30% - 7.90% | 6.60% |
| Tax rate | 3.90% - 6.20% | 5.05% |
| Cost of debt | 4.00% - 7.00% | 5.50% |
| WACC | 5.2% - 7.8% | 6.5% |
| Category | Low | High |
| Long-term bond rate | 2.6% | 3.1% |
| Equity market risk premium | 7.4% | 8.4% |
| Adjusted beta | 0.37 | 0.51 |
| Additional risk adjustments | 0.0% | 0.5% |
| Cost of equity | 5.30% | 7.90% |
| Tax rate | 3.90% | 6.20% |
| Debt/Equity ratio | 0.09 | 0.09 |
| Cost of debt | 4.00% | 7.00% |
| After-tax WACC | 5.2% | 7.8% |
| Selected WACC | 6.5% | |
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 MDX.BK:
cost_of_equity (6.60%) = risk_free_rate (2.85%) + equity_risk_premium (7.90%) * adjusted_beta (0.37) + 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.