The WACC of Blue Ribbon Income Fund (RBN.UN.TO) is 6.2%.
Range | Selected | |
Cost of equity | 7.0% - 10.6% | 8.8% |
Tax rate | 25.9% - 26.5% | 26.2% |
Cost of debt | 5.0% - 5.0% | 5% |
WACC | 5.3% - 7.1% | 6.2% |
Category | Low | High |
Long-term bond rate | 3.2% | 3.7% |
Equity market risk premium | 5.1% | 6.1% |
Adjusted beta | 0.74 | 1.05 |
Additional risk adjustments | 0.0% | 0.5% |
Cost of equity | 7.0% | 10.6% |
Tax rate | 25.9% | 26.5% |
Debt/Equity ratio | 1 | 1 |
Cost of debt | 5.0% | 5.0% |
After-tax WACC | 5.3% | 7.1% |
Selected WACC | 6.2% | |
Debt/Equity | Unlevered | |||
Peers | Company Name | ratio | Beta | beta |
RBN.UN.TO | Blue Ribbon Income Fund | 1.06 | 1.04 | 0.58 |
AAB.TO | Aberdeen International Inc | 0.01 | 0.86 | 0.86 |
CPTA | Capitala Finance Corp | 3.1 | 1.93 | 0.59 |
GECC | Great Elm Capital Corp | 1.53 | 0.34 | 0.16 |
HCAP | Harvest Capital Credit Corp | 1.11 | 1.21 | 0.67 |
HGBL | Heritage Global Inc | 0 | 0.1 | 0.1 |
HNNA | Hennessy Advisors Inc | 0.41 | 0.06 | 0.05 |
LPC.V | Lorne Park Capital Partners Inc | 0.08 | 0.52 | 0.49 |
MEDI.CN | Myconic Capital Corp | 0 | 1.07 | 1.06 |
NFD.A.V | Northfield Capital Corp | 0.12 | 1.01 | 0.93 |
PFX | Phenixfin Corporation | 1.34 | 0.11 | 0.06 |
Low | High | |
Unlevered beta | 0.49 | 0.59 |
Relevered beta | 0.61 | 1.07 |
Adjusted relevered beta | 0.74 | 1.05 |
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 RBN.UN.TO:
cost_of_equity (8.80%) = risk_free_rate (3.45%) + equity_risk_premium (5.60%) * adjusted_beta (0.74) + 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.