The WACC of Transat AT Inc (TRZ.TO) is 14.6%.
| Range | Selected | |
| Cost of equity | 46.10% - 91.50% | 68.80% |
| Tax rate | 1.30% - 2.00% | 1.65% |
| Cost of debt | 4.00% - 20.20% | 12.10% |
| WACC | 6.0% - 23.2% | 14.6% |
| Category | Low | High |
| Long-term bond rate | 3.2% | 3.7% |
| Equity market risk premium | 5.1% | 6.1% |
| Adjusted beta | 8.42 | 14.31 |
| Additional risk adjustments | 0.0% | 0.5% |
| Cost of equity | 46.10% | 91.50% |
| Tax rate | 1.30% | 2.00% |
| Debt/Equity ratio | 19.75 | 19.75 |
| Cost of debt | 4.00% | 20.20% |
| After-tax WACC | 6.0% | 23.2% |
| Selected WACC | 14.6% | |
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 TRZ.TO:
cost_of_equity (68.80%) = risk_free_rate (3.45%) + equity_risk_premium (5.60%) * adjusted_beta (8.42) + 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.