PEB WACC - Weighted Average Cost of Capital

The WACC of Pebblebrook Hotel Trust (PEB) is 7.1%.

The Cost of Equity of Pebblebrook Hotel Trust (PEB) is 10.50%.

The Cost of Debt of Pebblebrook Hotel Trust (PEB) is 5.50%.

	Range	Selected
Cost of equity	8.70% - 12.30%	10.50%
Tax rate	0.70% - 0.90%	0.80%
Cost of debt	4.00% - 7.00%	5.50%
WACC	5.5% - 8.7%	7.1%

WACC

PEB WACC calculation

Category	Low	High

Long-term bond rate	3.9%	4.4%
Equity market risk premium	4.6%	5.6%
Adjusted beta	1.04	1.32

Additional risk adjustments	0.0%	0.5%
Cost of equity	8.70%	12.30%

Tax rate	0.70%	0.90%
Debt/Equity ratio	2.03	2.03
Cost of debt	4.00%	7.00%

After-tax WACC	5.5%	8.7%


Selected WACC	7.1%

PEB'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 PEB:

cost_of_equity (10.50%) = risk_free_rate (4.15%) + equity_risk_premium (5.10%) * adjusted_beta (1.04) + 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.