The WACC of On Track Innovations Ltd (OTIVF) is 9.0%.
| Range | Selected | |
| Cost of equity | 7.80% - 12.90% | 10.35% |
| Tax rate | 1.30% - 3.40% | 2.35% |
| Cost of debt | 7.00% - 10.20% | 8.60% |
| WACC | 7.2% - 10.9% | 9.0% |
| Category | Low | High |
| Long-term bond rate | 3.2% | 3.7% |
| Equity market risk premium | 4.2% | 5.2% |
| Adjusted beta | 1.09 | 1.66 |
| Additional risk adjustments | 0.0% | 0.5% |
| Cost of equity | 7.80% | 12.90% |
| Tax rate | 1.30% | 3.40% |
| Debt/Equity ratio | 1.95 | 1.95 |
| Cost of debt | 7.00% | 10.20% |
| After-tax WACC | 7.2% | 10.9% |
| Selected WACC | 9.0% | |
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 OTIVF:
cost_of_equity (10.35%) = risk_free_rate (3.45%) + equity_risk_premium (4.70%) * adjusted_beta (1.09) + 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.