HOT.UN.TO WACC - Weighted Average Cost of Capital
The WACC of American Hotel Income Properties REIT LP (HOT.UN.TO) is 10.2%.
| Range | Selected | |
| Cost of equity | 17.6% - 38.5% | 28.05% |
| Tax rate | 5.9% - 9.6% | 7.75% |
| Cost of debt | 4.9% - 14.9% | 9.9% |
| WACC | 5.4% - 15.1% | 10.2% |
| Category | Low | High |
| Long-term bond rate | 3.2% | 3.7% |
| Equity market risk premium | 5.1% | 6.1% |
| Adjusted beta | 2.84 | 5.63 |
| Additional risk adjustments | 0.0% | 0.5% |
| Cost of equity | 17.6% | 38.5% |
| Tax rate | 5.9% | 9.6% |
| Debt/Equity ratio | 15.19 | 15.19 |
| Cost of debt | 4.9% | 14.9% |
| After-tax WACC | 5.4% | 15.1% |
| Selected WACC | 10.2% | |
| Debt/Equity | Unlevered | |||
| Peers | Company Name | ratio | Beta | beta |
| HOT.UN.TO | American Hotel Income Properties REIT LP | 15.19 | 1.19 | 0.08 |
| BHR | Braemar Hotels & Resorts Inc | 9.02 | 1.28 | 0.14 |
| CDOR | Condor Hospitality Trust Inc | 1.57 | 1.42 | 0.59 |
| CLDT | Chatham Lodging Trust | 1.2 | 1.12 | 0.54 |
| DRH | Diamondrock Hospitality Co | 0.73 | 0.88 | 0.53 |
| HT | Hersha Hospitality Trust | 1.56 | 1.37 | 0.57 |
| IHT | InnSuites Hospitality Trust | 0.51 | 0.17 | 0.12 |
| INN | Summit Hotel Properties Inc | 3.02 | 1.23 | 0.33 |
| SOHO | Sotherly Hotels Inc | 10.64 | 0.51 | 0.05 |
| XHR | Xenia Hotels & Resorts Inc | 1.14 | 1.27 | 0.62 |
| Low | High | |
| Unlevered beta | 0.25 | 0.53 |
| Relevered beta | 3.75 | 7.91 |
| Adjusted relevered beta | 2.84 | 5.63 |
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 (28.05%) = risk_free_rate (3.45%) + equity_risk_premium (5.60%) * adjusted_beta (2.84) + 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.