OTEX.TO
Open Text Corp
Price:  
41.67 
CAD
Volume:  
746,223.00
Canada | Software
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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.