TD.TO WACC - Weighted Average Cost of Capital
The WACC of Toronto-Dominion Bank (TD.TO) is 5.3%.
| Range | Selected | |
| Cost of equity | 6.2% - 8.7% | 7.45% |
| Tax rate | 20.5% - 22.4% | 21.45% |
| Cost of debt | 5.0% - 5.0% | 5% |
| WACC | 4.9% - 5.8% | 5.3% |
| Category | Low | High |
| Long-term bond rate | 3.2% | 3.7% |
| Equity market risk premium | 5.1% | 6.1% |
| Adjusted beta | 0.59 | 0.74 |
| Additional risk adjustments | 0.0% | 0.5% |
| Cost of equity | 6.2% | 8.7% |
| Tax rate | 20.5% | 22.4% |
| Debt/Equity ratio | 1.48 | 1.48 |
| Cost of debt | 5.0% | 5.0% |
| After-tax WACC | 4.9% | 5.8% |
| Selected WACC | 5.3% | |
| Debt/Equity | Unlevered | |||
| Peers | Company Name | ratio | Beta | beta |
| TD.TO | Toronto-Dominion Bank | 1.48 | 0.62 | 0.28 |
| BMO.TO | Bank of Montreal | 1.75 | 1.19 | 0.5 |
| BNS.TO | Bank of Nova Scotia | 2.63 | 0.69 | 0.22 |
| CBA.AX | Commonwealth Bank of Australia | 0.75 | 1.02 | 0.64 |
| CM.TO | Canadian Imperial Bank of Commerce | 1.59 | 0.63 | 0.28 |
| HFBA | HFB Financial Corp | 0.96 | -0.1 | -0.05 |
| LB.TO | Laurentian Bank of Canada | 14.47 | 0.29 | 0.02 |
| RY.TO | Royal Bank of Canada | 1.41 | 0 | 0 |
| USB | U.S. Bancorp | 0.98 | 1.19 | 0.67 |
| WFC | Wells Fargo & Co | 1.03 | 0.22 | 0.12 |
| Low | High | |
| Unlevered beta | 0.18 | 0.28 |
| Relevered beta | 0.39 | 0.61 |
| Adjusted relevered beta | 0.59 | 0.74 |
TD.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 TD.TO:
cost_of_equity (7.45%) = risk_free_rate (3.45%) + equity_risk_premium (5.60%) * adjusted_beta (0.59) + 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.