The WACC of Gladstone Commercial Corp (GOOD) is 6.4%.
Range | Selected | |
Cost of equity | 6.8% - 9.1% | 7.95% |
Tax rate | 26.2% - 27.0% | 26.6% |
Cost of debt | 4.2% - 9.1% | 6.65% |
WACC | 4.9% - 7.9% | 6.4% |
Category | Low | High |
Long-term bond rate | 3.9% | 4.4% |
Equity market risk premium | 4.6% | 5.6% |
Adjusted beta | 0.63 | 0.75 |
Additional risk adjustments | 0.0% | 0.5% |
Cost of equity | 6.8% | 9.1% |
Tax rate | 26.2% | 27.0% |
Debt/Equity ratio | 1 | 1 |
Cost of debt | 4.2% | 9.1% |
After-tax WACC | 4.9% | 7.9% |
Selected WACC | 6.4% | |
Debt/Equity | Unlevered | |||
Peers | Company Name | ratio | Beta | beta |
GOOD | Gladstone Commercial Corp | 1 | 0.56 | 0.32 |
BTB.UN.TO | BTB Real Estate Investment Trust | 2.26 | 1.14 | 0.43 |
CTO | CTO Realty Growth Inc | 0.89 | 0.32 | 0.19 |
FCD.UN.V | Firm Capital Property Trust | 1.1 | 1.25 | 0.69 |
FREVS | First Real Estate Investment Trust of New Jersey | 1.11 | 0.03 | 0.02 |
MR.UN.TO | Melcor Real Estate Investment Trust | 5.56 | 0.62 | 0.12 |
MRT.UN.TO | Morguard Real Estate Investment Trust | 3.3 | 0.22 | 0.07 |
NXR.UN.TO | Nexus Real Estate Investment Trust | 2.55 | 1.51 | 0.53 |
OLP | One Liberty Properties Inc | 0.81 | 0.48 | 0.31 |
PRV.UN.TO | PRO Real Estate Investment Trust | 1.46 | 1.03 | 0.5 |
Low | High | |
Unlevered beta | 0.26 | 0.36 |
Relevered beta | 0.45 | 0.63 |
Adjusted relevered beta | 0.63 | 0.75 |
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 GOOD:
cost_of_equity (7.95%) = risk_free_rate (4.15%) + equity_risk_premium (5.10%) * adjusted_beta (0.63) + 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.