The WACC of Middlefield Can-Global REIT Income Fund (RCO.UN.TO) is 8.2%.
| Range | Selected | |
| Cost of equity | 6.90% - 9.90% | 8.40% |
| Tax rate | 1.70% - 3.10% | 2.40% |
| Cost of debt | 5.00% - 5.00% | 5.00% |
| WACC | 6.8% - 9.6% | 8.2% |
| Category | Low | High |
| Long-term bond rate | 3.4% | 3.9% |
| Equity market risk premium | 4.7% | 5.7% |
| Adjusted beta | 0.76 | 0.97 |
| Additional risk adjustments | 0.0% | 0.5% |
| Cost of equity | 6.90% | 9.90% |
| Tax rate | 1.70% | 3.10% |
| Debt/Equity ratio | 0.05 | 0.05 |
| Cost of debt | 5.00% | 5.00% |
| After-tax WACC | 6.8% | 9.6% |
| Selected WACC | 8.2% | |
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 RCO.UN.TO:
cost_of_equity (8.40%) = risk_free_rate (3.65%) + equity_risk_premium (5.20%) * adjusted_beta (0.76) + 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.