LMFA WACC - Weighted Average Cost of Capital
The WACC of LM Funding America Inc (LMFA) is 9.6%.
| Range | Selected | |
| Cost of equity | 6.1% - 8.2% | 7.15% |
| Tax rate | 0.2% - 2.4% | 1.3% |
| Cost of debt | 7.0% - 19.1% | 13.05% |
| WACC | 6.5% - 12.7% | 9.6% |
| Category | Low | High |
| Long-term bond rate | 3.9% | 4.4% |
| Equity market risk premium | 4.6% | 5.6% |
| Adjusted beta | 0.49 | 0.6 |
| Additional risk adjustments | 0.0% | 0.5% |
| Cost of equity | 6.1% | 8.2% |
| Tax rate | 0.2% | 2.4% |
| Debt/Equity ratio | 0.75 | 0.75 |
| Cost of debt | 7.0% | 19.1% |
| After-tax WACC | 6.5% | 12.7% |
| Selected WACC | 9.6% | |
| Debt/Equity | Unlevered | |||
| Peers | Company Name | ratio | Beta | beta |
| LMFA | LM Funding America Inc | 0.75 | 2.82 | 1.61 |
| ACD.TO | Accord Financial Corp | 15.36 | 0.6 | 0.04 |
| BCF.V | Builders Capital Mortgage Corp | 0.17 | 0.27 | 0.23 |
| BLX | Foreign Trade Bank of Latin America Inc | 3.05 | 0.75 | 0.19 |
| GWGH | GWG Holdings Inc | 29.86 | 0.05 | 0 |
| IOU.V | Iou Financial Inc | 0.25 | 0.64 | 0.51 |
| MLC.NE | Mount Logan Capital Inc | 2 | 0.68 | 0.23 |
| RNP.V | Royalty North Partners Ltd | 0.16 | 1.8 | 1.55 |
| SFI.V | Solution Financial Inc | 0.34 | 0.94 | 0.7 |
| SWKH | SWK Holdings Corp | 0.23 | 0.07 | 0.06 |
| ORCH.L | Orchard Funding Group PLC | 5.09 | -1.52 | -0.25 |
| Low | High | |
| Unlevered beta | 0.19 | 0.23 |
| Relevered beta | 0.24 | 0.4 |
| Adjusted relevered beta | 0.49 | 0.6 |
LMFA'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 LMFA:
cost_of_equity (7.15%) = risk_free_rate (4.15%) + equity_risk_premium (5.10%) * adjusted_beta (0.49) + 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.