EFC WACC - Weighted Average Cost of Capital
The WACC of Ellington Financial Inc (EFC) is 4.9%.
| Range | Selected | |
| Cost of equity | 7.6% - 9.8% | 8.7% |
| Tax rate | 2.4% - 30.5% | 16.45% |
| Cost of debt | 4.0% - 7.5% | 5.75% |
| WACC | 4.2% - 5.6% | 4.9% |
| Category | Low | High |
| Long-term bond rate | 3.9% | 4.4% |
| Equity market risk premium | 4.6% | 5.6% |
| Adjusted beta | 0.82 | 0.88 |
| Additional risk adjustments | 0.0% | 0.5% |
| Cost of equity | 7.6% | 9.8% |
| Tax rate | 2.4% | 30.5% |
| Debt/Equity ratio | 11.61 | 11.61 |
| Cost of debt | 4.0% | 7.5% |
| After-tax WACC | 4.2% | 5.6% |
| Selected WACC | 4.9% | |
| Debt/Equity | Unlevered | |||
| Peers | Company Name | ratio | Beta | beta |
| EFC | Ellington Financial Inc | 11.61 | 0.47 | 0.04 |
| ACRE | Ares Commercial Real Estate Corp | 4.42 | 1 | 0.19 |
| AJX | Great Ajax Corp | 7.27 | 0.54 | 0.07 |
| CMO | Capstead Mortgage Corp | 11.18 | 1.56 | 0.13 |
| DX | Dynex Capital Inc | 5.16 | 0.41 | 0.07 |
| GPMT | Granite Point Mortgage Trust Inc | 14.28 | 0.81 | 0.05 |
| IVR | Invesco Mortgage Capital Inc | 9.94 | 0.48 | 0.05 |
| KREF | KKR Real Estate Finance Trust Inc | 7.85 | 0.47 | 0.05 |
| ORC | Orchid Island Capital Inc | 6.58 | 0.72 | 0.1 |
| RC | Ready Capital Corp | 10.99 | 0.72 | 0.06 |
| Low | High | |
| Unlevered beta | 0.06 | 0.07 |
| Relevered beta | 0.73 | 0.82 |
| Adjusted relevered beta | 0.82 | 0.88 |
EFC'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 EFC:
cost_of_equity (8.70%) = risk_free_rate (4.15%) + equity_risk_premium (5.10%) * adjusted_beta (0.82) + 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.