The WACC of Southern Pacific Resource Corp (STPJF) is 5.1%.
| Range | Selected | |
| Cost of equity | 5.10% - 7,685.60% | 3,845.35% |
| Tax rate | 24.80% - 34.30% | 29.55% |
| Cost of debt | 7.00% - 7.00% | 7.00% |
| WACC | 5.3% - 5.0% | 5.1% |
| Category | Low | High |
| Long-term bond rate | 3.9% | 4.4% |
| Equity market risk premium | 4.6% | 5.6% |
| Adjusted beta | -1606.37 | 51.83 |
| Additional risk adjustments | 7390.5% | 7391.0% |
| Cost of equity | 5.10% | 7,685.60% |
| Tax rate | 24.80% | 34.30% |
| Debt/Equity ratio | 20000.42 | 20000.42 |
| Cost of debt | 7.00% | 7.00% |
| After-tax WACC | 5.3% | 5.0% |
| Selected WACC | 5.1% | |
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 STPJF:
cost_of_equity (3,845.35%) = risk_free_rate (4.15%) + equity_risk_premium (5.10%) * adjusted_beta (-1606.37) + risk_adjustments (7,390.75%)
We include the risk adjustments, which range from 0% to 1%, to keep our WACC conservatives, especially for companies traded in developing markets.