The WACC of Source Energy Services Ltd (SHLE.TO) is 9.7%.
| Range | Selected | |
| Cost of equity | 11.40% - 15.80% | 13.60% |
| Tax rate | 7.00% - 15.10% | 11.05% |
| Cost of debt | 8.40% - 9.40% | 8.90% |
| WACC | 9.0% - 10.4% | 9.7% |
| Category | Low | High |
| Long-term bond rate | 3.2% | 3.7% |
| Equity market risk premium | 5.1% | 6.1% |
| Adjusted beta | 1.62 | 1.91 |
| Additional risk adjustments | 0.0% | 0.5% |
| Cost of equity | 11.40% | 15.80% |
| Tax rate | 7.00% | 15.10% |
| Debt/Equity ratio | 2.15 | 2.15 |
| Cost of debt | 8.40% | 9.40% |
| After-tax WACC | 9.0% | 10.4% |
| Selected WACC | 9.7% | |
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 SHLE.TO:
cost_of_equity (13.60%) = risk_free_rate (3.45%) + equity_risk_premium (5.60%) * adjusted_beta (1.62) + 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.