The WACC of Parex Resources Inc (PXT.TO) is 9.4%.
Range | Selected | |
Cost of equity | 8.6% - 11.1% | 9.85% |
Tax rate | 33.5% - 41.0% | 37.25% |
Cost of debt | 4.0% - 4.5% | 4.25% |
WACC | 8.2% - 10.5% | 9.4% |
Category | Low | High |
Long-term bond rate | 3.2% | 3.7% |
Equity market risk premium | 5.1% | 6.1% |
Adjusted beta | 1.06 | 1.13 |
Additional risk adjustments | 0.0% | 0.5% |
Cost of equity | 8.6% | 11.1% |
Tax rate | 33.5% | 41.0% |
Debt/Equity ratio | 0.06 | 0.06 |
Cost of debt | 4.0% | 4.5% |
After-tax WACC | 8.2% | 10.5% |
Selected WACC | 9.4% | |
Debt/Equity | Unlevered | |||
Peers | Company Name | ratio | Beta | beta |
PXT.TO | Parex Resources Inc | 0.06 | 1.6 | 1.54 |
ARX.TO | ARC Resources Ltd | 0.14 | 1.21 | 1.12 |
CRK | Comstock Resources Inc | 0.35 | 1.45 | 1.2 |
DEN | Denbury Inc | 0.01 | 0.41 | 0.41 |
MGY | Magnolia Oil & Gas Corp | 0.09 | 0.99 | 0.94 |
MTDR | Matador Resources Co | 0.55 | 1.26 | 0.94 |
NOG | Northern Oil and Gas Inc | 0.83 | 1.34 | 0.89 |
POU.TO | Paramount Resources Ltd | 0.06 | 1.85 | 1.78 |
PSK.TO | Prairiesky Royalty Ltd | 0.02 | 1.13 | 1.12 |
WCP.TO | Whitecap Resources Inc | 0.1 | 1.56 | 1.47 |
Low | High | |
Unlevered beta | 1.05 | 1.15 |
Relevered beta | 1.09 | 1.19 |
Adjusted relevered beta | 1.06 | 1.13 |
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 PXT.TO:
cost_of_equity (9.85%) = risk_free_rate (3.45%) + equity_risk_premium (5.60%) * adjusted_beta (1.06) + 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.