The WACC of Property Perfect PCL (PF.BK) is 12.5%.
| Range | Selected | |
| Cost of equity | 10.20% - 15.10% | 12.65% |
| Tax rate | 8.90% - 13.30% | 11.10% |
| Cost of debt | 5.90% - 22.60% | 14.25% |
| WACC | 5.6% - 19.4% | 12.5% |
| Category | Low | High |
| Long-term bond rate | 2.6% | 3.1% |
| Equity market risk premium | 7.4% | 8.4% |
| Adjusted beta | 1.03 | 1.36 |
| Additional risk adjustments | 0.0% | 0.5% |
| Cost of equity | 10.20% | 15.10% |
| Tax rate | 8.90% | 13.30% |
| Debt/Equity ratio | 24.97 | 24.97 |
| Cost of debt | 5.90% | 22.60% |
| After-tax WACC | 5.6% | 19.4% |
| Selected WACC | 12.5% | |
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 PF.BK:
cost_of_equity (12.65%) = risk_free_rate (2.85%) + equity_risk_premium (7.90%) * adjusted_beta (1.03) + 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.