The WACC of ExactEarth Ltd (XCT.TO) is 6.7%.
| Range | Selected | |
| Cost of equity | 5.70% - 7.70% | 6.70% |
| Tax rate | 0.60% - 1.10% | 0.85% |
| Cost of debt | 6.20% - 7.00% | 6.60% |
| WACC | 5.7% - 7.6% | 6.7% |
| Category | Low | High |
| Long-term bond rate | 3.4% | 3.9% |
| Equity market risk premium | 4.7% | 5.7% |
| Adjusted beta | 0.49 | 0.58 |
| Additional risk adjustments | 0.0% | 0.5% |
| Cost of equity | 5.70% | 7.70% |
| Tax rate | 0.60% | 1.10% |
| Debt/Equity ratio | 0.07 | 0.07 |
| Cost of debt | 6.20% | 7.00% |
| After-tax WACC | 5.7% | 7.6% |
| Selected WACC | 6.7% | |
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 XCT.TO:
cost_of_equity (6.70%) = risk_free_rate (3.65%) + equity_risk_premium (5.20%) * adjusted_beta (0.49) + 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.