The WACC of Saturn Oil & Gas Inc (SOIL.V) is 10.4%.
| Range | Selected | |
| Cost of equity | 12.00% - 16.20% | 14.10% |
| Tax rate | 3.10% - 4.80% | 3.95% |
| Cost of debt | 5.00% - 5.00% | 5.00% |
| WACC | 9.1% - 11.6% | 10.4% |
| Category | Low | High |
| Long-term bond rate | 4.2% | 4.7% |
| Equity market risk premium | 5.5% | 6.5% |
| Adjusted beta | 1.42 | 1.7 |
| Additional risk adjustments | 0.0% | 0.5% |
| Cost of equity | 12.00% | 16.20% |
| Tax rate | 3.10% | 4.80% |
| Debt/Equity ratio | 0.67 | 0.67 |
| Cost of debt | 5.00% | 5.00% |
| After-tax WACC | 9.1% | 11.6% |
| Selected WACC | 10.4% | |
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 SOIL.V:
cost_of_equity (14.10%) = risk_free_rate (4.45%) + equity_risk_premium (6.00%) * adjusted_beta (1.42) + 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.