HOT.UN.TO WACC - Weighted Average Cost of Capital

The WACC of American Hotel Income Properties REIT LP (HOT.UN.TO) is 13.0%.

The Cost of Equity of American Hotel Income Properties REIT LP (HOT.UN.TO) is 7.75%.

The Cost of Debt of American Hotel Income Properties REIT LP (HOT.UN.TO) is 14.15%.

	Range	Selected
Cost of equity	5.60% - 9.90%	7.75%
Tax rate	1.40% - 5.10%	3.25%
Cost of debt	5.10% - 23.20%	14.15%
WACC	5.1% - 20.9%	13.0%

WACC

HOT.UN.TO WACC calculation

Category	Low	High

Long-term bond rate	3.2%	3.7%
Equity market risk premium	5.1%	6.1%
Adjusted beta	0.48	0.95

Additional risk adjustments	0.0%	0.5%
Cost of equity	5.60%	9.90%

Tax rate	1.40%	5.10%
Debt/Equity ratio	9.62	9.62
Cost of debt	5.10%	23.20%

After-tax WACC	5.1%	20.9%


Selected WACC	13.0%

HOT.UN.TO'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 HOT.UN.TO:

cost_of_equity (7.75%) = risk_free_rate (3.45%) + equity_risk_premium (5.60%) * adjusted_beta (0.48) + 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.