The WACC of Terrace Energy Corp (TZR.V) is 4.9%.
| Range | Selected | |
| Cost of equity | 4.50% - 7.90% | 6.20% |
| Tax rate | 26.20% - 27.00% | 26.60% |
| Cost of debt | 5.00% - 5.00% | 5.00% |
| WACC | 4.1% - 5.8% | 4.9% |
| Category | Low | High |
| Long-term bond rate | 4.2% | 4.7% |
| Equity market risk premium | 5.5% | 6.5% |
| Adjusted beta | -0.31 | 0.12 |
| Additional risk adjustments | 2.0% | 2.5% |
| Cost of equity | 4.50% | 7.90% |
| Tax rate | 26.20% | 27.00% |
| Debt/Equity ratio | 1 | 1 |
| Cost of debt | 5.00% | 5.00% |
| After-tax WACC | 4.1% | 5.8% |
| Selected WACC | 4.9% | |
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 TZR.V:
cost_of_equity (6.20%) = risk_free_rate (4.45%) + equity_risk_premium (6.00%) * adjusted_beta (-0.31) + risk_adjustments (2.25%)
We include the risk adjustments, which range from 0% to 1%, to keep our WACC conservatives, especially for companies traded in developing markets.