PHT WACC - Weighted Average Cost of Capital
The WACC of Pioneer High Income Trust (PHT) is 6.5%.
| Range | Selected | |
| Cost of equity | 7.2% - 9.4% | 8.3% |
| Tax rate | 26.2% - 27.0% | 26.6% |
| Cost of debt | 4.0% - 4.5% | 4.25% |
| WACC | 5.7% - 7.3% | 6.5% |
| Category | Low | High |
| Long-term bond rate | 3.9% | 4.4% |
| Equity market risk premium | 4.6% | 5.6% |
| Adjusted beta | 0.72 | 0.82 |
| Additional risk adjustments | 0.0% | 0.5% |
| Cost of equity | 7.2% | 9.4% |
| Tax rate | 26.2% | 27.0% |
| Debt/Equity ratio | 0.53 | 0.53 |
| Cost of debt | 4.0% | 4.5% |
| After-tax WACC | 5.7% | 7.3% |
| Selected WACC | 6.5% | |
| Debt/Equity | Unlevered | |||
| Peers | Company Name | ratio | Beta | beta |
| PHT | Pioneer High Income Trust | 0.53 | 3.55 | 2.56 |
| IVH | Ivy High Income Opportunities Fund | 0.47 | 0.7 | 0.52 |
| PGI.UN.TO | PIMCO Global Income Opportunities Fund | 0.45 | 0.71 | 0.54 |
| RIB.UN.TO | Ridgewood Canadian Investment Grade Bond Fund | 0.06 | 0.02 | 0.02 |
| Low | High | |
| Unlevered beta | 0.52 | 0.53 |
| Relevered beta | 0.58 | 0.73 |
| Adjusted relevered beta | 0.72 | 0.82 |
PHT'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 PHT:
cost_of_equity (8.30%) = risk_free_rate (4.15%) + equity_risk_premium (5.10%) * adjusted_beta (0.72) + 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.