DHC WACC - Weighted Average Cost of Capital

The WACC of Diversified Healthcare Trust (DHC) is 11.6%.

The Cost of Equity of Diversified Healthcare Trust (DHC) is 6.60%.

The Cost of Debt of Diversified Healthcare Trust (DHC) is 15.15%.

	Range	Selected
Cost of equity	5.80% - 7.40%	6.60%
Tax rate	0.40% - 0.60%	0.50%
Cost of debt	6.40% - 23.90%	15.15%
WACC	6.1% - 17.0%	11.6%

WACC

DHC WACC calculation

Category	Low	High

Long-term bond rate	3.9%	4.4%
Equity market risk premium	4.6%	5.6%
Adjusted beta	0.42	0.45

Additional risk adjustments	0.0%	0.5%
Cost of equity	5.80%	7.40%

Tax rate	0.40%	0.60%
Debt/Equity ratio	1.43	1.43
Cost of debt	6.40%	23.90%

After-tax WACC	6.1%	17.0%


Selected WACC	11.6%

DHC'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 DHC:

cost_of_equity (6.60%) = risk_free_rate (4.15%) + equity_risk_premium (5.10%) * adjusted_beta (0.42) + 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.