The WACC of Adastra Holdings Ltd (XTRX.CN) is 8.5%.
| Range | Selected | |
| Cost of equity | 8.90% - 11.00% | 9.95% |
| Tax rate | 1.00% - 2.50% | 1.75% |
| Cost of debt | 7.00% - 9.40% | 8.20% |
| WACC | 7.4% - 9.6% | 8.5% |
| Category | Low | High |
| Long-term bond rate | 3.2% | 3.7% |
| Equity market risk premium | 5.1% | 6.1% |
| Adjusted beta | 1.12 | 1.12 |
| Additional risk adjustments | 0.0% | 0.5% |
| Cost of equity | 8.90% | 11.00% |
| Tax rate | 1.00% | 2.50% |
| Debt/Equity ratio | 3.23 | 3.23 |
| Cost of debt | 7.00% | 9.40% |
| After-tax WACC | 7.4% | 9.6% |
| Selected WACC | 8.5% | |
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 (9.95%) = risk_free_rate (3.45%) + equity_risk_premium (5.60%) * adjusted_beta (1.12) + 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.