EDF WACC - Weighted Average Cost of Capital
The WACC of Stone Harbor Emerging Markets Income Fund (EDF) is 7.4%.
| Range | Selected | |
| Cost of equity | 6.8% - 8.6% | 7.7% |
| Tax rate | 26.2% - 27.0% | 26.6% |
| Cost of debt | 4.7% - 5.1% | 4.9% |
| WACC | 6.5% - 8.2% | 7.4% |
| Category | Low | High |
| Long-term bond rate | 3.9% | 4.4% |
| Equity market risk premium | 4.6% | 5.6% |
| Adjusted beta | 0.64 | 0.67 |
| Additional risk adjustments | 0.0% | 0.5% |
| Cost of equity | 6.8% | 8.6% |
| Tax rate | 26.2% | 27.0% |
| Debt/Equity ratio | 0.09 | 0.09 |
| Cost of debt | 4.7% | 5.1% |
| After-tax WACC | 6.5% | 8.2% |
| Selected WACC | 7.4% | |
| Debt/Equity | Unlevered | |||
| Peers | Company Name | ratio | Beta | beta |
| EDF | Stone Harbor Emerging Markets Income Fund | 0.09 | 3.55 | 3.32 |
| EFF | Eaton Vance Floating-Rate Income Plus Fund | 0.46 | 0.71 | 0.53 |
| FAP.TO | Aberdeen Asia-Pacific Income Investment Company Ltd | 0.55 | 0.54 | 0.38 |
| FSLF | First Eagle Senior Loan Fund | 0.39 | 0.51 | 0.4 |
| PBY.UN.TO | Canso Credit Income Fund | 0.18 | 0.51 | 0.45 |
| ROCC | Roth CH Acquisition II Co | 0.39 | 1.05 | 0.82 |
| Low | High | |
| Unlevered beta | 0.45 | 0.53 |
| Relevered beta | 0.46 | 0.51 |
| Adjusted relevered beta | 0.64 | 0.67 |
EDF'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 EDF:
cost_of_equity (7.70%) = risk_free_rate (4.15%) + equity_risk_premium (5.10%) * adjusted_beta (0.64) + 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.