The WACC of Arbor Realty Trust Inc (ABR) is 12.2%.
Range | Selected | |
Cost of equity | 5.8% - 7.6% | 6.7% |
Tax rate | 5.7% - 8.2% | 6.95% |
Cost of debt | 5.0% - 23.9% | 14.45% |
WACC | 4.9% - 19.5% | 12.2% |
Category | Low | High |
Long-term bond rate | 3.9% | 4.4% |
Equity market risk premium | 4.6% | 5.6% |
Adjusted beta | 0.42 | 0.49 |
Additional risk adjustments | 0.0% | 0.5% |
Cost of equity | 5.8% | 7.6% |
Tax rate | 5.7% | 8.2% |
Debt/Equity ratio | 4.91 | 4.91 |
Cost of debt | 5.0% | 23.9% |
After-tax WACC | 4.9% | 19.5% |
Selected WACC | 12.2% | |
Debt/Equity | Unlevered | |||
Peers | Company Name | ratio | Beta | beta |
ABR | Arbor Realty Trust Inc | 4.91 | 0.15 | 0.03 |
ACR | Acres Commercial Realty Corp | 10.43 | 0.19 | 0.02 |
ARI | Apollo Commercial Real Estate Finance Inc | 4.69 | 0.6 | 0.11 |
ECRO | ECC Capital Corp | 302.06 | -0.55 | 0 |
IVR | Invesco Mortgage Capital Inc | 9.49 | 0.51 | 0.05 |
JERT | JER Investors Trust Inc | 106974 | 0.82 | 0 |
LADR | Ladder Capital Corp | 2.25 | 0.36 | 0.11 |
RC | Ready Capital Corp | 10.08 | 0.89 | 0.09 |
RWT | Redwood Trust Inc | 21.56 | 0.79 | 0.04 |
SACH | Sachem Capital Corp | 5.4 | -0.01 | 0 |
Low | High | |
Unlevered beta | 0.02 | 0.04 |
Relevered beta | 0.13 | 0.24 |
Adjusted relevered beta | 0.42 | 0.49 |
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 ABR:
cost_of_equity (6.70%) = risk_free_rate (4.15%) + equity_risk_premium (5.10%) * adjusted_beta (0.42) + 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.