FT
Franklin Universal Trust
Price:  
7.46 
USD
Volume:  
61,392
United States | Finance and Insurance

FT WACC - Weighted Average Cost of Capital

The WACC of Franklin Universal Trust (FT) is 6.6%.

The Cost of Equity of Franklin Universal Trust (FT) is 7.55%.
The Cost of Debt of Franklin Universal Trust (FT) is 5.5%.

RangeSelected
Cost of equity6.3% - 8.8%7.55%
Tax rate26.2% - 27.0%26.6%
Cost of debt4.0% - 7.0%5.5%
WACC5.4% - 7.8%6.6%
WACC

FT WACC calculation

CategoryLowHigh
Long-term bond rate3.9%4.4%
Equity market risk premium4.6%5.6%
Adjusted beta0.530.7
Additional risk adjustments0.0%0.5%
Cost of equity6.3%8.8%
Tax rate26.2%27.0%
Debt/Equity ratio
0.350.35
Cost of debt4.0%7.0%
After-tax WACC5.4%7.8%
Selected WACC6.6%

FT WACC - Detailed calculations of Beta

LowHigh
Unlevered beta0.380.52
Relevered beta0.30.55
Adjusted relevered beta0.530.7

FT'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 FT:

cost_of_equity (7.55%) = risk_free_rate (4.15%) + equity_risk_premium (5.10%) * adjusted_beta (0.53) + 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.