SHOP
Shopify Inc
Price:  
107.11 
USD
Volume:  
6,770,808.00
Canada | IT Services
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SHOP WACC - Weighted Average Cost of Capital

The WACC of Shopify Inc (SHOP) is 8.2%.

The Cost of Equity of Shopify Inc (SHOP) is 8.25%.
The Cost of Debt of Shopify Inc (SHOP) is 4.25%.

Range Selected
Cost of equity 6.90% - 9.60% 8.25%
Tax rate 8.50% - 17.10% 12.80%
Cost of debt 4.00% - 4.50% 4.25%
WACC 6.9% - 9.5% 8.2%
WACC

SHOP WACC calculation

Category Low High
Long-term bond rate 3.9% 4.4%
Equity market risk premium 4.6% 5.6%
Adjusted beta 0.67 0.84
Additional risk adjustments 0.0% 0.5%
Cost of equity 6.90% 9.60%
Tax rate 8.50% 17.10%
Debt/Equity ratio 0.01 0.01
Cost of debt 4.00% 4.50%
After-tax WACC 6.9% 9.5%
Selected WACC 8.2%

SHOP'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 SHOP:

cost_of_equity (8.25%) = risk_free_rate (4.15%) + equity_risk_premium (5.10%) * adjusted_beta (0.67) + 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.