APTS WACC - Weighted Average Cost of Capital

The WACC of Preferred Apartment Communities Inc (APTS) is 6.8%.

The Cost of Equity of Preferred Apartment Communities Inc (APTS) is 7.80%.

The Cost of Debt of Preferred Apartment Communities Inc (APTS) is 8.40%.

	Range	Selected
Cost of equity	6.50% - 9.10%	7.80%
Tax rate	27.00% - 27.00%	27.00%
Cost of debt	4.20% - 12.60%	8.40%
WACC	4.5% - 9.2%	6.8%

WACC

APTS WACC calculation

Category	Low	High

Long-term bond rate	3.2%	3.7%
Equity market risk premium	4.2%	5.2%
Adjusted beta	0.8	0.93

Additional risk adjustments	0.0%	0.5%
Cost of equity	6.50%	9.10%

Tax rate	27.00%	27.00%
Debt/Equity ratio	1.45	1.45
Cost of debt	4.20%	12.60%

After-tax WACC	4.5%	9.2%


Selected WACC	6.8%

APTS's CAPM model and how its cost of Equity is calculated

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 APTS:

cost_of_equity (7.80%) = risk_free_rate (3.45%) + equity_risk_premium (4.70%) * adjusted_beta (0.8) + 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.