The WACC of Pipestone Energy Corp (PIPE.TO) is 9.3%.
Range | Selected | |
Cost of equity | 10.10% - 12.90% | 11.50% |
Tax rate | 23.20% - 24.10% | 23.65% |
Cost of debt | 5.00% - 5.00% | 5.00% |
WACC | 8.3% - 10.3% | 9.3% |
Category | Low | High |
Long-term bond rate | 3.2% | 3.7% |
Equity market risk premium | 5.1% | 6.1% |
Adjusted beta | 1.36 | 1.43 |
Additional risk adjustments | 0.0% | 0.5% |
Cost of equity | 10.10% | 12.90% |
Tax rate | 23.20% | 24.10% |
Debt/Equity ratio | 0.39 | 0.39 |
Cost of debt | 5.00% | 5.00% |
After-tax WACC | 8.3% | 10.3% |
Selected WACC | 9.3% | |
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 PIPE.TO:
cost_of_equity (11.50%) = risk_free_rate (3.45%) + equity_risk_premium (5.60%) * adjusted_beta (1.36) + 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.