The WACC of Trican Well Service Ltd (TCW.TO) is 9.5%.
| Range | Selected | |
| Cost of equity | 8.20% - 10.90% | 9.55% |
| Tax rate | 19.20% - 24.20% | 21.70% |
| Cost of debt | 4.00% - 13.20% | 8.60% |
| WACC | 8.1% - 10.8% | 9.5% |
| Category | Low | High |
| Long-term bond rate | 3.2% | 3.7% |
| Equity market risk premium | 5.1% | 6.1% |
| Adjusted beta | 1 | 1.1 |
| Additional risk adjustments | 0.0% | 0.5% |
| Cost of equity | 8.20% | 10.90% |
| Tax rate | 19.20% | 24.20% |
| Debt/Equity ratio | 0.03 | 0.03 |
| Cost of debt | 4.00% | 13.20% |
| After-tax WACC | 8.1% | 10.8% |
| Selected WACC | 9.5% | |
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 TCW.TO:
cost_of_equity (9.55%) = risk_free_rate (3.45%) + equity_risk_premium (5.60%) * adjusted_beta (1) + 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.