LTC WACC - Weighted Average Cost of Capital
The WACC of LTC Properties Inc (LTC) is 6.3%.
| Range | Selected | |
| Cost of equity | 6.4% - 8.1% | 7.25% |
| Tax rate | 26.2% - 27.0% | 26.6% |
| Cost of debt | 4.7% - 6.1% | 5.4% |
| WACC | 5.5% - 7.0% | 6.3% |
| Category | Low | High |
| Long-term bond rate | 3.9% | 4.4% |
| Equity market risk premium | 4.6% | 5.6% |
| Adjusted beta | 0.54 | 0.57 |
| Additional risk adjustments | 0.0% | 0.5% |
| Cost of equity | 6.4% | 8.1% |
| Tax rate | 26.2% | 27.0% |
| Debt/Equity ratio | 0.42 | 0.42 |
| Cost of debt | 4.7% | 6.1% |
| After-tax WACC | 5.5% | 7.0% |
| Selected WACC | 6.3% | |
| Debt/Equity | Unlevered | |||
| Peers | Company Name | ratio | Beta | beta |
| LTC | LTC Properties Inc | 0.42 | 0.13 | 0.1 |
| CHCT | Community Healthcare Trust Inc | 1.07 | 0.62 | 0.35 |
| CTRE | CareTrust REIT Inc | 0.07 | 0.06 | 0.05 |
| DOC | Physicians Realty Trust | 0.72 | 0.44 | 0.29 |
| GBCS | Global Healthcare REIT Inc | 6.07 | -0.71 | -0.13 |
| GMRE | Global Medical REIT Inc | 1.42 | 0.51 | 0.25 |
| NHI | National Health Investors Inc | 0.32 | 0.33 | 0.27 |
| NWH.UN.TO | NorthWest Healthcare Properties REIT | 2.47 | 0.89 | 0.32 |
| SNR | New Senior Investment Group Inc | 2 | 2.09 | 0.85 |
| UHT | Universal Health Realty Income Trust | 0.68 | 0.35 | 0.23 |
| Low | High | |
| Unlevered beta | 0.24 | 0.28 |
| Relevered beta | 0.31 | 0.36 |
| Adjusted relevered beta | 0.54 | 0.57 |
LTC'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 LTC:
cost_of_equity (7.25%) = risk_free_rate (4.15%) + equity_risk_premium (5.10%) * adjusted_beta (0.54) + 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.