CIM WACC - Weighted Average Cost of Capital
The WACC of Chimera Investment Corp (CIM) is 13.3%.
| Range | Selected | |
| Cost of equity | 6.2% - 10.0% | 8.1% |
| Tax rate | 0.1% - 0.1% | 0.1% |
| Cost of debt | 4.0% - 23.9% | 13.95% |
| WACC | 4.2% - 22.4% | 13.3% |
| Category | Low | High |
| Long-term bond rate | 3.9% | 4.4% |
| Equity market risk premium | 4.6% | 5.6% |
| Adjusted beta | 0.51 | 0.93 |
| Additional risk adjustments | 0.0% | 0.5% |
| Cost of equity | 6.2% | 10.0% |
| Tax rate | 0.1% | 0.1% |
| Debt/Equity ratio | 8.8 | 8.8 |
| Cost of debt | 4.0% | 23.9% |
| After-tax WACC | 4.2% | 22.4% |
| Selected WACC | 13.3% | |
| Debt/Equity | Unlevered | |||
| Peers | Company Name | ratio | Beta | beta |
| CIM | Chimera Investment Corp | 8.8 | 0.79 | 0.08 |
| ACR | Acres Commercial Realty Corp | 10.43 | 0.19 | 0.02 |
| ARI | Apollo Commercial Real Estate Finance Inc | 4.69 | 0.6 | 0.1 |
| BXMT | Blackstone Mortgage Trust Inc | 4.65 | 0.68 | 0.12 |
| ECRO | ECC Capital Corp | 302.06 | -0.55 | 0 |
| JERT | JER Investors Trust Inc | 106974 | 0.82 | 0 |
| LADR | Ladder Capital Corp | 2.25 | 0.36 | 0.11 |
| NRZ | New Residential Investment Corp | 4.31 | 1.67 | 0.31 |
| RWT | Redwood Trust Inc | 21.56 | 0.79 | 0.04 |
| SACH | Sachem Capital Corp | 5.4 | -0.01 | 0 |
| Low | High | |
| Unlevered beta | 0.03 | 0.09 |
| Relevered beta | 0.27 | 0.9 |
| Adjusted relevered beta | 0.51 | 0.93 |
CIM'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 CIM:
cost_of_equity (8.10%) = risk_free_rate (4.15%) + equity_risk_premium (5.10%) * adjusted_beta (0.51) + 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.