The WACC of Petrotal Corp (TAL.TO) is 6.3%.
| Range | Selected | |
| Cost of equity | 5.50% - 8.50% | 7.00% |
| Tax rate | 17.20% - 24.30% | 20.75% |
| Cost of debt | 4.00% - 5.50% | 4.75% |
| WACC | 5.0% - 7.6% | 6.3% |
| Category | Low | High |
| Long-term bond rate | 3.2% | 3.7% |
| Equity market risk premium | 5.1% | 6.1% |
| Adjusted beta | -0.13 | 0.23 |
| Additional risk adjustments | 3.0% | 3.5% |
| Cost of equity | 5.50% | 8.50% |
| Tax rate | 17.20% | 24.30% |
| Debt/Equity ratio | 0.29 | 0.29 |
| Cost of debt | 4.00% | 5.50% |
| After-tax WACC | 5.0% | 7.6% |
| Selected WACC | 6.3% | |
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 TAL.TO:
cost_of_equity (7.00%) = risk_free_rate (3.45%) + equity_risk_premium (5.60%) * adjusted_beta (-0.13) + risk_adjustments (3.25%)
We include the risk adjustments, which range from 0% to 1%, to keep our WACC conservatives, especially for companies traded in developing markets.