OCSL WACC - Weighted Average Cost of Capital
The WACC of Oaktree Specialty Lending Corp (OCSL) is 9.2%.
| Range | Selected | |
| Cost of equity | 10.5% - 15.9% | 13.2% |
| Tax rate | 1.5% - 2.8% | 2.15% |
| Cost of debt | 5.4% - 7.5% | 6.45% |
| WACC | 7.5% - 10.9% | 9.2% |
| Category | Low | High |
| Long-term bond rate | 3.9% | 4.4% |
| Equity market risk premium | 4.6% | 5.6% |
| Adjusted beta | 1.44 | 1.97 |
| Additional risk adjustments | 0.0% | 0.5% |
| Cost of equity | 10.5% | 15.9% |
| Tax rate | 1.5% | 2.8% |
| Debt/Equity ratio | 1.41 | 1.41 |
| Cost of debt | 5.4% | 7.5% |
| After-tax WACC | 7.5% | 10.9% |
| Selected WACC | 9.2% | |
| Debt/Equity | Unlevered | |||
| Peers | Company Name | ratio | Beta | beta |
| OCSL | Oaktree Specialty Lending Corp | 1.41 | 0.56 | 0.23 |
| AD.UN.TO | Alaris Equity Partners Income Trust | 0.08 | 1.36 | 1.27 |
| BCSF | Bain Capital Specialty Finance Inc | 1.4 | 0.59 | 0.25 |
| EIT.UN.TO | Canoe EIT Income Fund | 0.1 | 1.18 | 1.07 |
| FIH.U.TO | Fairfax India Holdings Corp | 0.29 | 1.33 | 1.04 |
| GCG.TO | Guardian Capital Group Ltd | 0.11 | 1.1 | 1 |
| PZN | Pzena Investment Management Inc | 0 | 1.3 | 1.3 |
| SLRC | SLR Investment Corp | 1.15 | 0.55 | 0.26 |
| TCPC | BlackRock TCP Capital Corp | 1.71 | 0.68 | 0.25 |
| WETF | Wisdom Tree Investments Inc | 0.42 | 1.44 | 1.02 |
| Low | High | |
| Unlevered beta | 0.7 | 1.03 |
| Relevered beta | 1.66 | 2.45 |
| Adjusted relevered beta | 1.44 | 1.97 |
OCSL'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 OCSL:
cost_of_equity (13.20%) = risk_free_rate (4.15%) + equity_risk_premium (5.10%) * adjusted_beta (1.44) + 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.