CIO WACC - Weighted Average Cost of Capital

The WACC of City Office REIT Inc (CIO) is 8.7%.

The Cost of Equity of City Office REIT Inc (CIO) is 7.40%.

The Cost of Debt of City Office REIT Inc (CIO) is 12.50%.

	Range	Selected
Cost of equity	6.40% - 8.40%	7.40%
Tax rate	26.20% - 27.00%	26.60%
Cost of debt	4.10% - 20.90%	12.50%
WACC	3.9% - 13.5%	8.7%

WACC

CIO WACC calculation

Category	Low	High

Long-term bond rate	3.9%	4.4%
Equity market risk premium	4.6%	5.6%
Adjusted beta	0.55	0.62

Additional risk adjustments	0.0%	0.5%
Cost of equity	6.40%	8.40%

Tax rate	26.20%	27.00%
Debt/Equity ratio	2.97	2.97
Cost of debt	4.10%	20.90%

After-tax WACC	3.9%	13.5%


Selected WACC	8.7%

CIO'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 CIO:

cost_of_equity (7.40%) = risk_free_rate (4.15%) + equity_risk_premium (5.10%) * adjusted_beta (0.55) + 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.