ARCC
Ares Capital Corp
Price:  
22.75 
USD
Volume:  
3,434,788
United States | Capital Markets

ARCC WACC - Weighted Average Cost of Capital

The WACC of Ares Capital Corp (ARCC) is 7.8%.

The Cost of Equity of Ares Capital Corp (ARCC) is 9.65%.
The Cost of Debt of Ares Capital Corp (ARCC) is 5.9%.

RangeSelected
Cost of equity8.3% - 11.0%9.65%
Tax rate3.0% - 4.1%3.55%
Cost of debt4.3% - 7.5%5.9%
WACC6.4% - 9.2%7.8%
WACC

ARCC WACC calculation

CategoryLowHigh
Long-term bond rate3.9%4.4%
Equity market risk premium4.6%5.6%
Adjusted beta0.961.1
Additional risk adjustments0.0%0.5%
Cost of equity8.3%11.0%
Tax rate3.0%4.1%
Debt/Equity ratio
0.870.87
Cost of debt4.3%7.5%
After-tax WACC6.4%9.2%
Selected WACC7.8%

ARCC'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 ARCC:

cost_of_equity (9.65%) = risk_free_rate (4.15%) + equity_risk_premium (5.10%) * adjusted_beta (0.96) + 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.