NAC WACC - Weighted Average Cost of Capital

The WACC of Nuveen California Quality Municipal Income Fund (NAC) is 10.7%.

The Cost of Equity of Nuveen California Quality Municipal Income Fund (NAC) is 11.15%.

The Cost of Debt of Nuveen California Quality Municipal Income Fund (NAC) is 13.95%.

	Range	Selected
Cost of equity	10.00% - 12.30%	11.15%
Tax rate	26.20% - 27.00%	26.60%
Cost of debt	4.00% - 23.90%	13.95%
WACC	6.9% - 14.5%	10.7%

WACC

NAC WACC calculation

Category	Low	High

Long-term bond rate	3.9%	4.4%
Equity market risk premium	4.6%	5.6%
Adjusted beta	1.33	1.33

Additional risk adjustments	0.0%	0.5%
Cost of equity	10.00%	12.30%

Tax rate	26.20%	27.00%
Debt/Equity ratio	0.77	0.77
Cost of debt	4.00%	23.90%

After-tax WACC	6.9%	14.5%


Selected WACC	10.7%

NAC'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 NAC:

cost_of_equity (11.15%) = risk_free_rate (4.15%) + equity_risk_premium (5.10%) * adjusted_beta (1.33) + 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.