The WACC of Spartan Delta Corp (SDE.TO) is 10.0%.
Range | Selected | |
Cost of equity | 9.5% - 12.2% | 10.85% |
Tax rate | 9.5% - 13.5% | 11.5% |
Cost of debt | 6.3% - 8.5% | 7.4% |
WACC | 8.7% - 11.3% | 10.0% |
Category | Low | High |
Long-term bond rate | 3.2% | 3.7% |
Equity market risk premium | 5.1% | 6.1% |
Adjusted beta | 1.24 | 1.32 |
Additional risk adjustments | 0.0% | 0.5% |
Cost of equity | 9.5% | 12.2% |
Tax rate | 9.5% | 13.5% |
Debt/Equity ratio | 0.24 | 0.24 |
Cost of debt | 6.3% | 8.5% |
After-tax WACC | 8.7% | 11.3% |
Selected WACC | 10.0% | |
Debt/Equity | Unlevered | |||
Peers | Company Name | ratio | Beta | beta |
SDE.TO | Spartan Delta Corp | 0.24 | 1.61 | 1.32 |
ARX.TO | ARC Resources Ltd | 0.14 | 1.29 | 1.15 |
CNQ.TO | Canadian Natural Resources Ltd | 0.23 | 1.08 | 0.9 |
CPG.TO | Crescent Point Energy Corp | 0.57 | 1.1 | 0.73 |
MEG.TO | MEG Energy Corp | 0.18 | 1.76 | 1.52 |
PSK.TO | Prairiesky Royalty Ltd | 0.02 | 1.1 | 1.09 |
PXT.TO | Parex Resources Inc | 0.07 | 1.53 | 1.44 |
TOU.TO | Tourmaline Oil Corp | 0.05 | 0.92 | 0.88 |
WCP.TO | Whitecap Resources Inc | 0.11 | 1.59 | 1.46 |
IPCO.ST | International Petroleum Corp | 0.28 | 1.42 | 1.14 |
Low | High | |
Unlevered beta | 1.12 | 1.22 |
Relevered beta | 1.36 | 1.48 |
Adjusted relevered beta | 1.24 | 1.32 |
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 SDE.TO:
cost_of_equity (10.85%) = risk_free_rate (3.45%) + equity_risk_premium (5.60%) * adjusted_beta (1.24) + 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.