OTEX.TO WACC - Weighted Average Cost of Capital

The WACC of Open Text Corp (OTEX.TO) is 7.7%.

The Cost of Equity of Open Text Corp (OTEX.TO) is 10.60%.

The Cost of Debt of Open Text Corp (OTEX.TO) is 5.95%.

	Range	Selected
Cost of equity	9.10% - 12.10%	10.60%
Tax rate	32.00% - 33.70%	32.85%
Cost of debt	5.60% - 6.30%	5.95%
WACC	6.8% - 8.5%	7.7%

WACC

OTEX.TO WACC calculation

Category	Low	High

Long-term bond rate	3.2%	3.7%
Equity market risk premium	5.1%	6.1%
Adjusted beta	1.17	1.3

Additional risk adjustments	0.0%	0.5%
Cost of equity	9.10%	12.10%

Tax rate	32.00%	33.70%
Debt/Equity ratio	0.8	0.8
Cost of debt	5.60%	6.30%

After-tax WACC	6.8%	8.5%


Selected WACC	7.7%

OTEX.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 OTEX.TO:

cost_of_equity (10.60%) = risk_free_rate (3.45%) + equity_risk_premium (5.60%) * adjusted_beta (1.17) + 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.