The WACC of NC Housing PCL (NCH.BK) is 5.7%.
| Range | Selected | |
| Cost of equity | 5.90% - 7.60% | 6.75% |
| Tax rate | 16.40% - 22.90% | 19.65% |
| Cost of debt | 6.30% - 7.00% | 6.65% |
| WACC | 5.4% - 5.9% | 5.7% |
| Category | Low | High |
| Long-term bond rate | 2.6% | 3.1% |
| Equity market risk premium | 7.4% | 8.4% |
| Adjusted beta | 0.45 | 0.48 |
| Additional risk adjustments | 0.0% | 0.5% |
| Cost of equity | 5.90% | 7.60% |
| Tax rate | 16.40% | 22.90% |
| Debt/Equity ratio | 3.58 | 3.58 |
| Cost of debt | 6.30% | 7.00% |
| After-tax WACC | 5.4% | 5.9% |
| Selected WACC | 5.7% | |
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 NCH.BK:
cost_of_equity (6.75%) = risk_free_rate (2.85%) + equity_risk_premium (7.90%) * adjusted_beta (0.45) + 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.