The WACC of Westport Fuel Systems Inc (WPRT.TO) is 8.0%.
| Range | Selected | |
| Cost of equity | 10.50% - 14.20% | 12.35% |
| Tax rate | 16.00% - 26.10% | 21.05% |
| Cost of debt | 4.30% - 7.00% | 5.65% |
| WACC | 6.8% - 9.3% | 8.0% |
| Category | Low | High |
| Long-term bond rate | 3.2% | 3.7% |
| Equity market risk premium | 5.1% | 6.1% |
| Adjusted beta | 1.44 | 1.64 |
| Additional risk adjustments | 0.0% | 0.5% |
| Cost of equity | 10.50% | 14.20% |
| Tax rate | 16.00% | 26.10% |
| Debt/Equity ratio | 1.19 | 1.19 |
| Cost of debt | 4.30% | 7.00% |
| After-tax WACC | 6.8% | 9.3% |
| Selected WACC | 8.0% | |
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 WPRT.TO:
cost_of_equity (12.35%) = risk_free_rate (3.45%) + equity_risk_premium (5.60%) * adjusted_beta (1.44) + 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.