SPPP.U.TO WACC - Weighted Average Cost of Capital

The WACC of Sprott Physical Platinum and Palladium Trust (SPPP.U.TO) is 5.6%.

The Cost of Equity of Sprott Physical Platinum and Palladium Trust (SPPP.U.TO) is 7.55%.

The Cost of Debt of Sprott Physical Platinum and Palladium Trust (SPPP.U.TO) is 5.00%.

	Range	Selected
Cost of equity	6.50% - 8.60%	7.55%
Tax rate	25.90% - 26.50%	26.20%
Cost of debt	5.00% - 5.00%	5.00%
WACC	5.1% - 6.1%	5.6%

WACC

SPPP.U.TO WACC calculation

Category	Low	High

Long-term bond rate	3.2%	3.7%
Equity market risk premium	4.6%	5.6%
Adjusted beta	0.73	0.79

Additional risk adjustments	0.0%	0.5%
Cost of equity	6.50%	8.60%

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

After-tax WACC	5.1%	6.1%


Selected WACC	5.6%

SPPP.U.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 SPPP.U.TO:

cost_of_equity (7.55%) = risk_free_rate (3.45%) + equity_risk_premium (5.10%) * adjusted_beta (0.73) + 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.