The WACC of TerraVest Industries Inc (TVK.TO) is 6.1%.
| Range | Selected | |
| Cost of equity | 4.80% - 7.60% | 6.20% |
| Tax rate | 20.60% - 22.20% | 21.40% |
| Cost of debt | 6.30% - 8.70% | 7.50% |
| WACC | 4.9% - 7.4% | 6.1% |
| Category | Low | High |
| Long-term bond rate | 3.2% | 3.7% |
| Equity market risk premium | 5.1% | 6.1% |
| Adjusted beta | 0.13 | 0.41 |
| Additional risk adjustments | 1.0% | 1.5% |
| Cost of equity | 4.80% | 7.60% |
| Tax rate | 20.60% | 22.20% |
| Debt/Equity ratio | 0.4 | 0.4 |
| Cost of debt | 6.30% | 8.70% |
| After-tax WACC | 4.9% | 7.4% |
| Selected WACC | 6.1% | |
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 TVK.TO:
cost_of_equity (6.20%) = risk_free_rate (3.45%) + equity_risk_premium (5.60%) * adjusted_beta (0.13) + risk_adjustments (1.25%)
We include the risk adjustments, which range from 0% to 1%, to keep our WACC conservatives, especially for companies traded in developing markets.