USF.UN.TO WACC - Weighted Average Cost of Capital

The WACC of U.S. Financials Income Fund (USF.UN.TO) is 7.4%.

The Cost of Equity of U.S. Financials Income Fund (USF.UN.TO) is 11.20%.

The Cost of Debt of U.S. Financials Income Fund (USF.UN.TO) is 5.00%.

	Range	Selected
Cost of equity	9.60% - 12.80%	11.20%
Tax rate	26.50% - 26.50%	26.50%
Cost of debt	5.00% - 5.00%	5.00%
WACC	6.6% - 8.2%	7.4%

WACC

USF.UN.TO WACC calculation

Category	Low	High

Long-term bond rate	3.4%	3.9%
Equity market risk premium	4.7%	5.7%
Adjusted beta	1.31	1.46

Additional risk adjustments	0.0%	0.5%
Cost of equity	9.60%	12.80%

Tax rate	26.50%	26.50%
Debt/Equity ratio	1	1
Cost of debt	5.00%	5.00%

After-tax WACC	6.6%	8.2%


Selected WACC	7.4%

USF.UN.TO's CAPM model and how its cost of Equity is calculated

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 USF.UN.TO:

cost_of_equity (11.20%) = risk_free_rate (3.65%) + equity_risk_premium (5.20%) * adjusted_beta (1.31) + 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.