The WACC of Total Energy Services Inc (TOT.TO) is 7.0%.
| Range | Selected | |
| Cost of equity | 5.40% - 8.80% | 7.10% |
| Tax rate | 21.20% - 30.80% | 26.00% |
| Cost of debt | 4.00% - 7.30% | 5.65% |
| WACC | 5.3% - 8.6% | 7.0% |
| Category | Low | High |
| Long-term bond rate | 3.2% | 3.7% |
| Equity market risk premium | 5.1% | 6.1% |
| Adjusted beta | 0.35 | 0.69 |
| Additional risk adjustments | 0.5% | 1.0% |
| Cost of equity | 5.40% | 8.80% |
| Tax rate | 21.20% | 30.80% |
| Debt/Equity ratio | 0.06 | 0.06 |
| Cost of debt | 4.00% | 7.30% |
| After-tax WACC | 5.3% | 8.6% |
| Selected WACC | 7.0% | |
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 TOT.TO:
cost_of_equity (7.10%) = risk_free_rate (3.45%) + equity_risk_premium (5.60%) * adjusted_beta (0.35) + risk_adjustments (0.75%)
We include the risk adjustments, which range from 0% to 1%, to keep our WACC conservatives, especially for companies traded in developing markets.