The WACC of Adastra Holdings Ltd (XTRX.CN) is 14.2%.
| Range | Selected | |
| Cost of equity | 6.20% - 7.80% | 7.00% |
| Tax rate | 1.00% - 2.50% | 1.75% |
| Cost of debt | 9.40% - 23.20% | 16.30% |
| WACC | 8.7% - 19.6% | 14.2% |
| Category | Low | High |
| Long-term bond rate | 3.2% | 3.7% |
| Equity market risk premium | 5.1% | 6.1% |
| Adjusted beta | 0.59 | 0.59 |
| Additional risk adjustments | 0.0% | 0.5% |
| Cost of equity | 6.20% | 7.80% |
| Tax rate | 1.00% | 2.50% |
| Debt/Equity ratio | 4.04 | 4.04 |
| Cost of debt | 9.40% | 23.20% |
| After-tax WACC | 8.7% | 19.6% |
| Selected WACC | 14.2% | |
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 XTRX.CN:
cost_of_equity (7.00%) = risk_free_rate (3.45%) + equity_risk_premium (5.60%) * adjusted_beta (0.59) + 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.