SMT.TO WACC - Weighted Average Cost of Capital

The WACC of Sierra Metals Inc (SMT.TO) is 7.7%.

The Cost of Equity of Sierra Metals Inc (SMT.TO) is 9.20%.

The Cost of Debt of Sierra Metals Inc (SMT.TO) is 7.10%.

	Range	Selected
Cost of equity	7.30% - 11.10%	9.20%
Tax rate	25.90% - 26.50%	26.20%
Cost of debt	6.30% - 7.90%	7.10%
WACC	6.3% - 9.1%	7.7%

WACC

SMT.TO WACC calculation

Category	Low	High

Long-term bond rate	3.2%	3.7%
Equity market risk premium	5.1%	6.1%
Adjusted beta	0.81	1.13

Additional risk adjustments	0.0%	0.5%
Cost of equity	7.30%	11.10%

Tax rate	25.90%	26.50%
Debt/Equity ratio	0.59	0.59
Cost of debt	6.30%	7.90%

After-tax WACC	6.3%	9.1%


Selected WACC	7.7%

SMT.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 SMT.TO:

cost_of_equity (9.20%) = risk_free_rate (3.45%) + equity_risk_premium (5.60%) * adjusted_beta (0.81) + 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.