WFG.TO WACC - Weighted Average Cost of Capital

The WACC of West Fraser Timber Co Ltd (WFG.TO) is 6.5%.

The Cost of Equity of West Fraser Timber Co Ltd (WFG.TO) is 6.60%.

The Cost of Debt of West Fraser Timber Co Ltd (WFG.TO) is 6.40%.

	Range	Selected
Cost of equity	5.40% - 7.80%	6.60%
Tax rate	24.20% - 25.30%	24.75%
Cost of debt	5.80% - 7.00%	6.40%
WACC	5.3% - 7.7%	6.5%

WACC

WFG.TO WACC calculation

Category	Low	High

Long-term bond rate	3.2%	3.7%
Equity market risk premium	5.1%	6.1%
Adjusted beta	0.44	0.59

Additional risk adjustments	0.0%	0.5%
Cost of equity	5.40%	7.80%

Tax rate	24.20%	25.30%
Debt/Equity ratio	0.05	0.05
Cost of debt	5.80%	7.00%

After-tax WACC	5.3%	7.7%


Selected WACC	6.5%

WFG.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 WFG.TO:

cost_of_equity (6.60%) = risk_free_rate (3.45%) + equity_risk_premium (5.60%) * adjusted_beta (0.44) + 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.