Category	Low	High

Long-term bond rate	3.2%	3.7%
Equity market risk premium	4.2%	5.2%
Adjusted beta	0.59	0.66

Additional risk adjustments	0.0%	0.5%
Cost of equity	5.7%	7.6%

Tax rate	27.0%	27.0%
Debt/Equity ratio	0.07	0.07
Cost of debt	5.8%	8.0%

After-tax WACC	5.6%	7.5%


Selected WACC	6.5%

NHF WACC - Detailed calculations of Beta

		Debt/Equity		Unlevered
Peers	Company Name	ratio	Beta	beta

NHF	NexPoint Strategic Opportunities Fund	0.07	1.19	1.13
DFP	Flaherty & Crumrine Dynamic Preferred and Income Fund Inc	0.67	3.55	2.38
EAD	Wells Fargo Income Opportunities Fund	0.48	3.55	2.63
EVN	Eaton Vance Municipal Income Trust	0.42	3.55	2.72
FRA	BlackRock Floating Rate Income Strategies Fund Inc	0.33	3.55	2.87
JPI	Nuveen Preferred and Income Term Fund	0.85	3.55	2.19
LEO	BNY Mellon Strategic Municipals Inc	0.38	3.55	2.77
MMU	Western Asset Managed Municipals Fund Inc	0.41	3.55	2.73
MQY	BlackRock MuniYield Quality Fund Inc	0.07	3.55	3.38
PKO	PIMCO Income Opportunity Fund	0.77	0.65	0.42

	Low	High

Unlevered beta	2.53	2.72
Relevered beta	0.39	0.49
Adjusted relevered beta	0.59	0.66

NHF'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 NHF:

cost_of_equity (6.65%) = risk_free_rate (3.45%) + equity_risk_premium (4.70%) * adjusted_beta (0.59) + 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.