FMCC WACC - Weighted Average Cost of Capital
The WACC of Federal Home Loan Mortgage Corp (FMCC) is 7.9%.
| Range | Selected | |
| Cost of equity | 10.5% - 139.9% | 75.2% |
| Tax rate | 20.0% - 20.2% | 20.1% |
| Cost of debt | 4.0% - 15.6% | 9.8% |
| WACC | 3.2% - 12.7% | 7.9% |
| Category | Low | High |
| Long-term bond rate | 3.9% | 4.4% |
| Equity market risk premium | 4.6% | 5.6% |
| Adjusted beta | 1.45 | 24.11 |
| Additional risk adjustments | 0.0% | 0.5% |
| Cost of equity | 10.5% | 139.9% |
| Tax rate | 20.0% | 20.2% |
| Debt/Equity ratio | 692.65 | 692.65 |
| Cost of debt | 4.0% | 15.6% |
| After-tax WACC | 3.2% | 12.7% |
| Selected WACC | 7.9% | |
| Debt/Equity | Unlevered | |||
| Peers | Company Name | ratio | Beta | beta |
| FMCC | Federal Home Loan Mortgage Corp | 692.65 | 1.68 | 0 |
| COOP | Mr. Cooper Group Inc | 1.34 | -0.08 | -0.04 |
| FN.TO | First National Financial Corp | 19.89 | 0.05 | 0 |
| FNMA | Federal National Mortgage Association | 413.47 | 0.51 | 0 |
| GHLD | Guild Holdings Co | 2.4 | -0.23 | -0.08 |
| HMST | HomeStreet Inc | 3.12 | 0.4 | 0.11 |
| MTG | MGIC Investment Corp | 0.11 | 0.65 | 0.59 |
| OCN | Ocwen Financial Corp | 58.3 | 1.46 | 0.03 |
| PFSI | PennyMac Financial Services Inc | 2.78 | 0.41 | 0.13 |
| RDN | Radian Group Inc | 0.51 | 0.69 | 0.49 |
| Low | High | |
| Unlevered beta | 0 | 0.06 |
| Relevered beta | 1.67 | 35.49 |
| Adjusted relevered beta | 1.45 | 24.11 |
FMCC'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 FMCC:
cost_of_equity (75.20%) = risk_free_rate (4.15%) + equity_risk_premium (5.10%) * adjusted_beta (1.45) + 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.