The WACC of Urbana Corp (URB.TO) is 6.7%.
Range | Selected | |
Cost of equity | 7.4% - 10.4% | 8.9% |
Tax rate | 10.6% - 11.3% | 10.95% |
Cost of debt | 4.0% - 5.9% | 4.95% |
WACC | 5.5% - 7.8% | 6.7% |
Category | Low | High |
Long-term bond rate | 3.2% | 3.7% |
Equity market risk premium | 5.1% | 6.1% |
Adjusted beta | 0.83 | 1.03 |
Additional risk adjustments | 0.0% | 0.5% |
Cost of equity | 7.4% | 10.4% |
Tax rate | 10.6% | 11.3% |
Debt/Equity ratio | 1 | 1 |
Cost of debt | 4.0% | 5.9% |
After-tax WACC | 5.5% | 7.8% |
Selected WACC | 6.7% | |
Debt/Equity | Unlevered | |||
Peers | Company Name | ratio | Beta | beta |
URB.TO | Urbana Corp | 0 | 0.34 | 0.34 |
AAB.TO | Aberdeen International Inc | 0.01 | 0.82 | 0.81 |
BANX | StoneCastle Financial Corp | 0.31 | 0.5 | 0.39 |
CPTA | Capitala Finance Corp | 3.1 | 1.93 | 0.51 |
GECC | Great Elm Capital Corp | 1.5 | 0.36 | 0.15 |
GROW | U.S. Global Investors Inc | 0 | 0.39 | 0.39 |
HCAP | Harvest Capital Credit Corp | 1.11 | 1.21 | 0.61 |
HGBL | Heritage Global Inc | 0 | 0.14 | 0.14 |
MEDI.CN | Myconic Capital Corp | 0 | 1.07 | 1.06 |
NFD.A.V | Northfield Capital Corp | 0.11 | 1.06 | 0.96 |
PFX | Phenixfin Corporation | 1.34 | 0.11 | 0.05 |
Low | High | |
Unlevered beta | 0.39 | 0.51 |
Relevered beta | 0.75 | 1.04 |
Adjusted relevered beta | 0.83 | 1.03 |
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 URB.TO:
cost_of_equity (8.90%) = risk_free_rate (3.45%) + equity_risk_premium (5.60%) * adjusted_beta (0.83) + 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.