MG.TO WACC - Weighted Average Cost of Capital

The WACC of Magna International Inc (MG.TO) is 7.5%.

The Cost of Equity of Magna International Inc (MG.TO) is 9.40%.

The Cost of Debt of Magna International Inc (MG.TO) is 4.45%.

	Range	Selected
Cost of equity	7.60% - 11.20%	9.40%
Tax rate	24.30% - 27.80%	26.05%
Cost of debt	4.20% - 4.70%	4.45%
WACC	6.3% - 8.8%	7.5%

WACC

MG.TO WACC calculation

Category	Low	High

Long-term bond rate	3.2%	3.7%
Equity market risk premium	5.1%	6.1%
Adjusted beta	0.87	1.15

Additional risk adjustments	0.0%	0.5%
Cost of equity	7.60%	11.20%

Tax rate	24.30%	27.80%
Debt/Equity ratio	0.44	0.44
Cost of debt	4.20%	4.70%

After-tax WACC	6.3%	8.8%


Selected WACC	7.5%

MG.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 MG.TO:

cost_of_equity (9.40%) = risk_free_rate (3.45%) + equity_risk_premium (5.60%) * adjusted_beta (0.87) + 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.