PCYO WACC - Weighted Average Cost of Capital

The WACC of Pure Cycle Corp (PCYO) is 6.3%.

The Cost of Equity of Pure Cycle Corp (PCYO) is 6.40%.

The Cost of Debt of Pure Cycle Corp (PCYO) is 4.50%.

	Range	Selected
Cost of equity	5.40% - 7.40%	6.40%
Tax rate	24.40% - 24.60%	24.50%
Cost of debt	4.50% - 4.50%	4.50%
WACC	5.4% - 7.3%	6.3%

WACC

PCYO WACC calculation

Category	Low	High

Long-term bond rate	3.9%	4.4%
Equity market risk premium	4.6%	5.6%
Adjusted beta	0.33	0.45

Additional risk adjustments	0.0%	0.5%
Cost of equity	5.40%	7.40%

Tax rate	24.40%	24.60%
Debt/Equity ratio	0.02	0.02
Cost of debt	4.50%	4.50%

After-tax WACC	5.4%	7.3%


Selected WACC	6.3%

PCYO'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 PCYO:

cost_of_equity (6.40%) = risk_free_rate (4.15%) + equity_risk_premium (5.10%) * adjusted_beta (0.33) + 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.