The WACC of Lument Finance Trust Inc (LFT) is 13.3%.
Range | Selected | |
Cost of equity | 5.5% - 7.4% | 6.45% |
Tax rate | 0.1% - 0.4% | 0.25% |
Cost of debt | 5.1% - 23.9% | 14.5% |
WACC | 5.2% - 21.5% | 13.3% |
Category | Low | High |
Long-term bond rate | 3.9% | 4.4% |
Equity market risk premium | 4.6% | 5.6% |
Adjusted beta | 0.36 | 0.45 |
Additional risk adjustments | 0.0% | 0.5% |
Cost of equity | 5.5% | 7.4% |
Tax rate | 0.1% | 0.4% |
Debt/Equity ratio | 6.32 | 6.32 |
Cost of debt | 5.1% | 23.9% |
After-tax WACC | 5.2% | 21.5% |
Selected WACC | 13.3% | |
Debt/Equity | Unlevered | |||
Peers | Company Name | ratio | Beta | beta |
LFT | Lument Finance Trust Inc | 6.32 | 0.43 | 0.06 |
ACR | Acres Commercial Realty Corp | 9.99 | 0.12 | 0.01 |
CVHL | CV Holdings Inc | 570.34 | -1.09 | 0 |
EARN | Ellington Residential Mortgage REIT | 2.9 | 1 | 0.26 |
ECRO | ECC Capital Corp | 291.08 | -0.15 | 0 |
JERT | JER Investors Trust Inc | 106974 | 0.82 | 0 |
LOAN | Manhattan Bridge Capital Inc | 0.38 | -0.13 | -0.09 |
MITT | AG Mortgage Investment Trust Inc | 31.25 | 0.5 | 0.02 |
SACH | Sachem Capital Corp | 6.52 | 0.29 | 0.04 |
TRMT | Tremont Mortgage Trust | 3.7 | 1.91 | 0.41 |
Low | High | |
Unlevered beta | 0.01 | 0.02 |
Relevered beta | 0.04 | 0.18 |
Adjusted relevered beta | 0.36 | 0.45 |
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 LFT:
cost_of_equity (6.45%) = risk_free_rate (4.15%) + equity_risk_premium (5.10%) * adjusted_beta (0.36) + 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.