The WACC of Stelco Holdings Inc (STLC.TO) is 7.9%.
| Range | Selected | |
| Cost of equity | 6.90% - 9.20% | 8.05% |
| Tax rate | 5.80% - 14.20% | 10.00% |
| Cost of debt | 4.20% - 11.20% | 7.70% |
| WACC | 6.5% - 9.3% | 7.9% |
| Category | Low | High |
| Long-term bond rate | 3.2% | 3.7% |
| Equity market risk premium | 5.1% | 6.1% |
| Adjusted beta | 0.73 | 0.83 |
| Additional risk adjustments | 0.0% | 0.5% |
| Cost of equity | 6.90% | 9.20% |
| Tax rate | 5.80% | 14.20% |
| Debt/Equity ratio | 0.14 | 0.14 |
| Cost of debt | 4.20% | 11.20% |
| After-tax WACC | 6.5% | 9.3% |
| Selected WACC | 7.9% | |
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 STLC.TO:
cost_of_equity (8.05%) = risk_free_rate (3.45%) + equity_risk_premium (5.60%) * 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.