PFLT WACC - Weighted Average Cost of Capital
The WACC of PennantPark Floating Rate Capital Ltd (PFLT) is 8.5%.
| Range | Selected | |
| Cost of equity | 7.0% - 9.3% | 8.15% |
| Tax rate | 1.8% - 2.3% | 2.05% |
| Cost of debt | 5.7% - 12.4% | 9.05% |
| WACC | 6.2% - 10.8% | 8.5% |
| Category | Low | High |
| Long-term bond rate | 3.9% | 4.4% |
| Equity market risk premium | 4.6% | 5.6% |
| Adjusted beta | 0.69 | 0.79 |
| Additional risk adjustments | 0.0% | 0.5% |
| Cost of equity | 7.0% | 9.3% |
| Tax rate | 1.8% | 2.3% |
| Debt/Equity ratio | 1.1 | 1.1 |
| Cost of debt | 5.7% | 12.4% |
| After-tax WACC | 6.2% | 10.8% |
| Selected WACC | 8.5% | |
| Debt/Equity | Unlevered | |||
| Peers | Company Name | ratio | Beta | beta |
| PFLT | PennantPark Floating Rate Capital Ltd | 1.1 | 0.56 | 0.27 |
| BBDC | Barings BDC Inc | 1.45 | 0.56 | 0.23 |
| CCAP | Crescent Capital BDC Inc | 1.55 | 0.46 | 0.18 |
| CSWC | Capital Southwest Corp | 0.77 | 0.69 | 0.39 |
| FDUS | Fidus Investment Corp | 0.64 | 0.5 | 0.3 |
| GAIN | Gladstone Investment Corp | 0.88 | 0.68 | 0.37 |
| NEWT | Newtek Business Services Corp | 5.51 | 0.02 | 0 |
| PNNT | Pennantpark Investment Corp | 1.87 | 1.58 | 0.56 |
| TPVG | Triplepoint Venture Growth BDC Corp | 1.39 | 1.01 | 0.43 |
| WHF | WhiteHorse Finance Inc | 1.7 | -0.01 | -0.01 |
| Low | High | |
| Unlevered beta | 0.25 | 0.33 |
| Relevered beta | 0.54 | 0.69 |
| Adjusted relevered beta | 0.69 | 0.79 |
PFLT'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 PFLT:
cost_of_equity (8.15%) = risk_free_rate (4.15%) + equity_risk_premium (5.10%) * adjusted_beta (0.69) + 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.