JPI WACC - Weighted Average Cost of Capital

The WACC of Nuveen Preferred and Income Term Fund (JPI) is 8.2%.

The Cost of Equity of Nuveen Preferred and Income Term Fund (JPI) is 11.25%.

The Cost of Debt of Nuveen Preferred and Income Term Fund (JPI) is 6.55%.

	Range	Selected
Cost of equity	9.30% - 13.20%	11.25%
Tax rate	26.20% - 27.00%	26.60%
Cost of debt	4.00% - 9.10%	6.55%
WACC	6.3% - 10.2%	8.2%

WACC

JPI WACC calculation

Category	Low	High

Long-term bond rate	3.9%	4.4%
Equity market risk premium	4.6%	5.6%
Adjusted beta	1.17	1.49

Additional risk adjustments	0.0%	0.5%
Cost of equity	9.30%	13.20%

Tax rate	26.20%	27.00%
Debt/Equity ratio	0.87	0.87
Cost of debt	4.00%	9.10%

After-tax WACC	6.3%	10.2%


Selected WACC	8.2%

JPI'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 JPI:

cost_of_equity (11.25%) = risk_free_rate (4.15%) + equity_risk_premium (5.10%) * adjusted_beta (1.17) + 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.