The WACC of Pimco Energy and Tactical Credit Opportunities Fund (NRGX) is 8.6%.
Range | Selected | |
Cost of equity | 8.3% - 11.4% | 9.85% |
Tax rate | 26.2% - 27.0% | 26.6% |
Cost of debt | 5.5% - 5.5% | 5.5% |
WACC | 7.4% - 9.8% | 8.6% |
Category | Low | High |
Long-term bond rate | 4.2% | 4.7% |
Equity market risk premium | 5.0% | 6.0% |
Adjusted beta | 0.83 | 1.03 |
Additional risk adjustments | 0.0% | 0.5% |
Cost of equity | 8.3% | 11.4% |
Tax rate | 26.2% | 27.0% |
Debt/Equity ratio | 0.27 | 0.27 |
Cost of debt | 5.5% | 5.5% |
After-tax WACC | 7.4% | 9.8% |
Selected WACC | 8.6% | |
Debt/Equity | Unlevered | |||
Peers | Company Name | ratio | Beta | beta |
NRGX | Pimco Energy and Tactical Credit Opportunities Fund | 0.27 | 1.79 | 1.5 |
EVT.TO | Economic Investment Trust Ltd | 1.1 | 0.73 | 0.41 |
NHF | NexPoint Strategic Opportunities Fund | 0.07 | 1.19 | 1.13 |
PGI.UN.TO | PIMCO Global Income Opportunities Fund | 0.45 | 0.71 | 0.54 |
PKO | PIMCO Income Opportunity Fund | 0.77 | 0.65 | 0.42 |
Low | High | |
Unlevered beta | 0.49 | 0.77 |
Relevered beta | 0.75 | 1.04 |
Adjusted relevered beta | 0.83 | 1.03 |
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 NRGX:
cost_of_equity (9.85%) = risk_free_rate (4.45%) + equity_risk_premium (5.50%) * adjusted_beta (0.83) + 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.