SMA.TO WACC - Weighted Average Cost of Capital

The WACC of Standard Mercantile Acquisition Corp (SMA.TO) is 2.5%.

The Cost of Equity of Standard Mercantile Acquisition Corp (SMA.TO) is 1.35%.

The Cost of Debt of Standard Mercantile Acquisition Corp (SMA.TO) is 5.00%.

	Range	Selected
Cost of equity	1.30% - 1.40%	1.35%
Tax rate	25.90% - 26.50%	26.20%
Cost of debt	5.00% - 5.00%	5.00%
WACC	2.5% - 2.5%	2.5%

WACC

SMA.TO WACC calculation

Category	Low	High

Long-term bond rate	3.2%	3.7%
Equity market risk premium	5.1%	6.1%
Adjusted beta	-0.86	-0.86

Additional risk adjustments	2.5%	3.0%
Cost of equity	1.30%	1.40%

Tax rate	25.90%	26.50%
Debt/Equity ratio	1	1
Cost of debt	5.00%	5.00%

After-tax WACC	2.5%	2.5%


Selected WACC	2.5%

SMA.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 SMA.TO:

cost_of_equity (1.35%) = risk_free_rate (3.45%) + equity_risk_premium (5.60%) * adjusted_beta (-0.86) + risk_adjustments (2.75%)

We include the risk adjustments, which range from 0% to 1%, to keep our WACC conservatives, especially for companies traded in developing markets.