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

The WACC of American Hotel Income Properties REIT LP (HOT.UN.TO) is 10.6%.

The Cost of Equity of American Hotel Income Properties REIT LP (HOT.UN.TO) is 48.55%.

The Cost of Debt of American Hotel Income Properties REIT LP (HOT.UN.TO) is 9.90%.

	Range	Selected
Cost of equity	36.40% - 60.70%	48.55%
Tax rate	5.90% - 9.60%	7.75%
Cost of debt	4.90% - 14.90%	9.90%
WACC	5.9% - 15.4%	10.6%

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	6.51	9.27

Additional risk adjustments	0.0%	0.5%
Cost of equity	36.40%	60.70%

Tax rate	5.90%	9.60%
Debt/Equity ratio	23.59	23.59
Cost of debt	4.90%	14.90%

After-tax WACC	5.9%	15.4%


Selected WACC	10.6%

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 (48.55%) = risk_free_rate (3.45%) + equity_risk_premium (5.60%) * adjusted_beta (6.51) + 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.