CMO WACC - Weighted Average Cost of Capital
The WACC of Capstead Mortgage Corp (CMO) is 4.6%.
| Range | Selected | |
| Cost of equity | 12.8% - 18.9% | 15.85% |
| Tax rate | 27.0% - 27.0% | 27% |
| Cost of debt | 5.0% - 5.0% | 5% |
| WACC | 4.4% - 4.9% | 4.6% |
| Category | Low | High |
| Long-term bond rate | 3.2% | 3.7% |
| Equity market risk premium | 4.2% | 5.2% |
| Adjusted beta | 2.27 | 2.8 |
| Additional risk adjustments | 0.0% | 0.5% |
| Cost of equity | 12.8% | 18.9% |
| Tax rate | 27.0% | 27.0% |
| Debt/Equity ratio | 11.18 | 11.18 |
| Cost of debt | 5.0% | 5.0% |
| After-tax WACC | 4.4% | 4.9% |
| Selected WACC | 4.6% | |
| Debt/Equity | Unlevered | |||
| Peers | Company Name | ratio | Beta | beta |
| CMO | Capstead Mortgage Corp | 11.18 | 1.56 | 0.17 |
| ACR | Acres Commercial Realty Corp | 9.99 | 0.12 | 0.01 |
| ACRE | Ares Commercial Real Estate Corp | 4.42 | 1 | 0.24 |
| AJX | Great Ajax Corp | 7.27 | 0.54 | 0.09 |
| DX | Dynex Capital Inc | 5.16 | 0.41 | 0.09 |
| EFC | Ellington Financial Inc | 11.61 | 0.47 | 0.05 |
| GPMT | Granite Point Mortgage Trust Inc | 14.28 | 0.81 | 0.07 |
| LADR | Ladder Capital Corp | 2.35 | 0.32 | 0.12 |
| ORC | Orchid Island Capital Inc | 6.58 | 0.72 | 0.12 |
| SACH | Sachem Capital Corp | 6.52 | 0.29 | 0.05 |
| Low | High | |
| Unlevered beta | 0.08 | 0.1 |
| Relevered beta | 2.9 | 3.69 |
| Adjusted relevered beta | 2.27 | 2.8 |
CMO'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 CMO:
cost_of_equity (15.85%) = risk_free_rate (3.45%) + equity_risk_premium (4.70%) * adjusted_beta (2.27) + 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.