RIB.UN.TO WACC - Weighted Average Cost of Capital

The WACC of Ridgewood Canadian Investment Grade Bond Fund (RIB.UN.TO) is 6.6%.

The Cost of Equity of Ridgewood Canadian Investment Grade Bond Fund (RIB.UN.TO) is 6.75%.

The Cost of Debt of Ridgewood Canadian Investment Grade Bond Fund (RIB.UN.TO) is 5.50%.

	Range	Selected
Cost of equity	5.50% - 8.00%	6.75%
Tax rate	25.90% - 26.50%	26.20%
Cost of debt	4.00% - 7.00%	5.50%
WACC	5.4% - 7.9%	6.6%

WACC

RIB.UN.TO WACC calculation

Category	Low	High

Long-term bond rate	3.2%	3.7%
Equity market risk premium	5.1%	6.1%
Adjusted beta	0.46	0.64

Additional risk adjustments	0.0%	0.5%
Cost of equity	5.50%	8.00%

Tax rate	25.90%	26.50%
Debt/Equity ratio	0.06	0.06
Cost of debt	4.00%	7.00%

After-tax WACC	5.4%	7.9%


Selected WACC	6.6%

RIB.UN.TO's CAPM model and how its cost of Equity is calculated

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 RIB.UN.TO:

cost_of_equity (6.75%) = risk_free_rate (3.45%) + equity_risk_premium (5.60%) * adjusted_beta (0.46) + 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.