WACC. In any Annual Period, the Access Provider’s return on capital on capital expenditure in respect of which the Access Provider is entitled to recover a return shall be calculated as the average of the opening and closing depreciated book value for that period of the asset created by the expenditure multiplied by the Access Provider’s weighted average cost of capital (“WACC”).
WACC. The term "
WACC. The WACC component of the base fee has been set on the basis of the WACC of 7.8% provided for in the 2008 Administrative Settlement between the Provider and the Commerce Commission (Administrative Settlement). In the event that the WACC under the Administrative Settlement is adjusted (by any means including under any change to the Administrative Settlement, or by alternative agreement or by imposition under law) then the WACC component of the base fee (and thus the base fee itself) will be adjusted correspondingly (and with effect from the same date). If necessary to adjust the base fee paid since the effective date of the adjustment (i.e. if the adjustment is not determined until after the effective date and therefore operates retrospectively), there shall be an appropriate wash-up payment by the relevant party together with interest at the interest rate from the effective date until the date the wash-up payment is made.
WACC. The WACC is an overall required rate of return, which takes into account the required rate of return of all forms of invested capital (i.e. cost of debt and cost of equity capital). It is the rate of return indicative of the investment risk inherent in the ownership of the business enterprise, inclusive of all of its assets, tangible and intangible, current and long-term. In selecting a discount rate to apply, PwC reviewed available data from a variety of public sources, including selected North American public companies operating in the forest & paper industry, which may be considered somewhat comparable. The following table shows the key inputs used in the determination of the WACC: Risk-free rate7 2.6 % Equity risk premium8 5.0 % Relevered equity beta9 1.3 Size and company specific premium 5.5 % Cost of equity rounded 14.4 % Pre-tax cost of debt10 6.9 % Tax rate11 35.5 % Cost of debt rounded 4.5 % Debt as a % of total capital12 39.4 % After-tax WACC rounded 10.5 % The size and company specific premium was selected based on consideration of the following factors, among others: • The track record of financial results for Catalyst and the risks and uncertainties associated with the Forecast; • Catalyst's historical ability to achieve forecasted results; • The size/scale of Catalyst relative to other public companies operating in the forest and paper industry, which may be considered somewhat comparable to Catalyst (the "Guideline Companies"); and • Industry conditions, specifically, challenges in the operating environment. Based on the factors that PwC considered relevant, a WACC in the range of approximately 10.0% to 11.0% (midpoint of 10.5%), was selected. _______________________________ 720 Year US Treasury Strips - October 28, 2016 8Consensus Estimate for long-term investment horizon. 9Based on selected observed data for guideline public companies. 1020 Year US Industrial BB Bond Yield - October 28, 2016 11US and Canadian blended long-term tax rate 12Based on selected observed data for guideline public companies. Terminal Value In arriving at the terminal value of $313.4 million to $352.2 million, the Trend unlevered free cash flow for was capitalized using a multiplier in the range of 10.5 times to 11.8 times. The Trend multiplier is the inverse of the terminal capitalization rate, which was determined to be in the range of 10.0% to 11.0% less assumed long-term growth of 1.5% per annum. To this amount, PwC added the PV of the tax shield available beyo...
