Andean Precious Metals Corp. (APM.TO) Weighted Average Cost of Capital (WACC)

Andean Precious Metals Corp.

APM.TO (TSX)

Models
Andean Precious Metals Corp. Weighted Average Cost of Capital (WACC)

# Render description block
model.render_description({
    "data": r"""
## Weighted Average Cost of Capital (WACC)

WACC is a financial metric that helps in calculating a firm’s cost of financing by combining the cost of debt and cost of equity structure together.

`WACC` = `Equity Weight` * `Cost of Equity` + `Debt Weight` * `Cost of Debt` * (1 - `Tax Rate`)

> Read more: [Understanding WACC](https://www.investopedia.com/terms/w/wacc.asp)

> This model is a simplified version of Prof. Aswath Damodaran's spreadsheet [⬇️wacccalc.xls](https://pages.stern.nyu.edu/~adamodar/pc/wacccalc.xls)
""",
    "properties": {
        "width": "responsive"
    }
})

# --- Assumptions
assumptions.set({
    "timeseries": "annual",
    "data": {
        "#beta": """
            profile:beta
        """,
        "%riskFreeRate": """
            treasury:year10
        """,
        "%equityRiskPremium": """
            risk:totalEquityRiskPremium
        """,
        "%taxRate": """
            income:incomeTaxExpense / income:incomeBeforeTax 
            or if this <= 0:
            risk:corporateTaxRate
        """,
    },
    "titles": {
        "#beta": "Beta",
        "%riskFreeRate": "Risk Free Rate",
        "%equityRiskPremium": "Equity Risk Premium",
        "%taxRate": "Tax Rate",
    },
    "properties": {
        "width": "responsive",
        "title": "Assumptions",
        "id": "component-2",
        "bindTo": None
    },
    "descriptions": {
        "#beta": r"""
Beta measures the volatility of a stock's price in relation to the overall stock market. A higher beta indicates greater price fluctuations relative to the market.
        """,
        "%riskFreeRate": r"""
The risk-free rate represents the return an investor expects from an absolutely risk-free investment over a specified time period. By default, it is set to the current yield of the U.S. 10-Year Treasury Bond.
        """,
        "%equityRiskPremium": r"""
The market risk premium represents the additional return over the risk-free rate that investors expect for taking on the risks associated with equities.
        """,
        "%taxRate": r"""
`Tax Rate` = `Income Tax Expense` / `Income Before Tax`

This is the company’s **effective tax rate**, reflecting the average rate of tax actually paid on its pre-tax earnings (including all statutory, deferred, and non-recurring items).

This rate is used to adjust the after-tax cost of debt, since interest expense is tax-deductible.

## Discount Rate

`Discount Rate` =  
`Debt Weight` × `Cost of Debt` × (1 − `Tax Rate`)  
+ `Equity Weight` × `Cost of Equity`
        """,
    }
})

# --- Weights Calculations
data.compute_results({
    "%costOfDebt": """
        income:interestExpense / balance:totalDebt
    """,
    "marketCapitalizationTotalDebt": """
        profile:mktCap + balance:totalDebt
    """,
    "%equityWeight": """
        profile:mktCap / (profile:mktCap + balance:totalDebt)
    """,
    "%debtWeight": """
        1 - result:%equityWeight
    """,
}, timeseries="annual")

model.render_results({
    "timeseries": "annual",
    "data": {
        "income:interestExpense": {
            "label": "Interest Expense",
            "type": "$"
        },
        "balance:totalDebt": {
            "label": "/ Total Debt",
            "type": "$"
        },
        "result:%costOfDebt": {
            "label": "= Cost of Debt",
            "type": "%"
        },
        "profile:mktCap": {
            "label": "Market Capitalization",
            "type": "$"
        },
        "result:marketCapitalizationTotalDebt": {
            "label": "/ (Market Capitalization + Total Debt)",
            "type": "$"
        },
        "result:%equityWeight": {
            "label": "= Equity Weight",
            "type": "%"
        },
        "result:%debtWeight": {
            "label": "(1 - Equity Weight) = Debt Weight",
            "type": "%"
        },
    },
    "properties": {
        "title": "Weights Calculations",
        "width": "responsive",
        "hidden_keys": []
    }
})

# --- WACC Calculation
data.compute_results({
    "%costOfEquity": """
        assumption:%riskFreeRate +  assumption:#beta *  assumption:%equityRiskPremium
    """,
    "%costOfDebt": """
        income:interestExpense /  balance:totalDebt
    """,
    "%debtWeight": """
        balance:totalDebt / (profile:mktCap +  balance:totalDebt)
    """,
    "%equityWeight": """
        1 -  result:%debtWeight
    """,
    "%1TaxRate": """
        1 - assumption:%taxRate
    """,
    "%wacc": """
        result:%debtWeight *  result:%costOfDebt * (1 - assumption:%taxRate) +  result:%equityWeight* result:%costOfEquity
    """,
}, timeseries="annual")

model.render_results({
    "timeseries": "annual",
    "data": {
        "assumption:#beta": {
            "label": "Beta",
            "type": ""
        },
        "assumption:%equityRiskPremium": {
            "label": "* Equity Risk Premium",
            "type": "%"
        },
        "assumption:%riskFreeRate": {
            "label": "+ Risk Free Rate",
            "type": "%"
        },
        "result:%costOfEquity": {
            "label": "= Cost of Equity",
            "type": "%"
        },
        "result:%equityWeight": {
            "label": "* Equity Weight",
            "type": "%"
        },
        "result:%costOfDebt": {
            "label": "+ Cost of Debt",
            "type": "%"
        },
        "result:%debtWeight": {
            "label": "* Debt Weight",
            "type": "%"
        },
        "result:%1TaxRate": {
            "label": "* (1 - Tax Rate)",
            "type": "%"
        },
        "result:%wacc": {
            "label": "= WACC (Discount Rate)",
            "type": "%"
        },
    },
    "properties": {
        "title": "WACC Calculation",
        "width": "responsive",
        "hidden_keys": []
    }
})

# --- Weighted Average Cost of Capital
model.set_final_value({
    "value": data.get("""
        result:%wacc
    """, timeseries="annual"),
    "units": "%",
    "title": "Weighted Average Cost of Capital",
    "properties": {
        "width": "full" 
    }
})

Weighted Average Cost of Capital

%

* Values are not guaranteed, please do your own
research before making investment decisions.

Weighted Average Cost of Capital (WACC)

WACC is a financial metric that helps in calculating a firm’s cost of financing by combining the cost of debt and cost of equity structure together.

WACC = Equity Weight * Cost of Equity + Debt Weight * Cost of Debt * (1 - Tax Rate)

Read more: Understanding WACC

This model is a simplified version of Prof. Aswath Damodaran's spreadsheet ⬇️wacccalc.xls

Assumptions

Beta Beta Beta measures the volatility of a stock's price in relation to the overall stock market. A higher beta indicates greater price fluctuations relative to the market.	#
Risk Free Rate Risk Free Rate The risk-free rate represents the return an investor expects from an absolutely risk-free investment over a specified time period. By default, it is set to the current yield of the U.S. 10-Year Treasury Bond.	%
Equity Risk Premium Equity Risk Premium The market risk premium represents the additional return over the risk-free rate that investors expect for taking on the risks associated with equities.	%
Tax Rate Tax Rate `Tax Rate` = `Income Tax Expense` / `Income Before Tax` This is the company’s effective tax rate, reflecting the average rate of tax actually paid on its pre-tax earnings (including all statutory, deferred, and non-recurring items). This rate is used to adjust the after-tax cost of debt, since interest expense is tax-deductible. Discount Rate `Discount Rate` = `Debt Weight` × `Cost of Debt` × (1 − `Tax Rate`) + `Equity Weight` × `Cost of Equity`	%

Weights Calculations
Interest Expense	7.19 Mil. CAD
/ Total Debt	73.31 Mil. CAD
= Cost of Debt	9.8%
Market Capitalization	1.28 Bil. CAD
/ (Market Capitalization + Total Debt)	1.35 Bil. CAD
= Equity Weight	94.58%
(1 - Equity Weight) = Debt Weight	5.42%

WACC Calculation
Beta	1.77
* Equity Risk Premium	4.23%
+ Risk Free Rate	4.15%
= Cost of Equity	11.62%
* Equity Weight	94.58%
+ Cost of Debt	9.8%
* Debt Weight	5.42%
* (1 - Tax Rate)	79.02%
= WACC (Discount Rate)	11.41%

Weighted Average Cost of Capital

%

Weighted Average Cost of Capital (WACC)

Assumptions

Beta

Risk Free Rate

Equity Risk Premium

Tax Rate

Discount Rate

Weights Calculations

WACC Calculation

Discounted Cash Flow to Firm - Perpetual Growth

Earnings Power Value

Simple Dividend Discount Model

Simple Excess Return Model

Two-Stage Dividend Discount Model

Two-Stage Excess Return Model

Discounted Cash Flow to Firm - Exit Multiple

Discounted Future Market Cap

Peter Lynch Fair Value

Altman Z-Score

Beneish M-Score

Capital Asset Pricing Model (CAPM)

Margin Analysis

Piotroski F-Score

Return on Invested Capital (ROIC)

Shiller PE (CAPE) Ratio

Weighted Average Cost of Capital (WACC)

Andean Precious Metals Corp. Weighted Average Cost of Capital (WACC)

Weighted Average Cost of Capital

%

Weighted Average Cost of Capital (WACC)

Assumptions

Beta

Risk Free Rate

Equity Risk Premium

Tax Rate

Discount Rate

Weights Calculations

WACC Calculation

Discounted Cash Flow to Firm - Perpetual Growth

Earnings Power Value

Simple Dividend Discount Model

Simple Excess Return Model

Two-Stage Dividend Discount Model

Two-Stage Excess Return Model

Discounted Cash Flow to Firm - Exit Multiple

Discounted Future Market Cap

Peter Lynch Fair Value

Altman Z-Score

Beneish M-Score

Capital Asset Pricing Model (CAPM)

Margin Analysis

Piotroski F-Score

Return on Invested Capital (ROIC)

Shiller PE (CAPE) Ratio

Weighted Average Cost of Capital (WACC)