BYM WACC - Weighted Average Cost of Capital
The WACC of BlackRock Municipal Income Quality Trust (BYM) is 9.8%.
| Range | Selected | |
| Cost of equity | 10.1% - 13.5% | 11.8% |
| Tax rate | 26.2% - 27.0% | 26.6% |
| Cost of debt | 9.1% - 9.1% | 9.1% |
| WACC | 8.8% - 10.8% | 9.8% |
| Category | Low | High |
| Long-term bond rate | 3.9% | 4.4% |
| Equity market risk premium | 4.6% | 5.6% |
| Adjusted beta | 1.35 | 1.54 |
| Additional risk adjustments | 0.0% | 0.5% |
| Cost of equity | 10.1% | 13.5% |
| Tax rate | 26.2% | 27.0% |
| Debt/Equity ratio | 0.65 | 0.65 |
| Cost of debt | 9.1% | 9.1% |
| After-tax WACC | 8.8% | 10.8% |
| Selected WACC | 9.8% | |
| Debt/Equity | Unlevered | |||
| Peers | Company Name | ratio | Beta | beta |
| BYM | BlackRock Municipal Income Quality Trust | 0.65 | 3.55 | 2.41 |
| GPM | Guggenheim Enhanced Equity Income Fund | 0.33 | 1.45 | 1.16 |
| NRGX | Pimco Energy and Tactical Credit Opportunities Fund | 0.27 | 1.79 | 1.5 |
| PGI.UN.TO | PIMCO Global Income Opportunities Fund | 0.45 | 0.71 | 0.54 |
| Low | High | |
| Unlevered beta | 1.23 | 1.43 |
| Relevered beta | 1.52 | 1.81 |
| Adjusted relevered beta | 1.35 | 1.54 |
BYM'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 BYM:
cost_of_equity (11.80%) = risk_free_rate (4.15%) + equity_risk_premium (5.10%) * adjusted_beta (1.35) + 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.