The WACC of Rithm Capital Corp (RITM) is 11.0%.
| Range | Selected | |
| Cost of equity | 7.10% - 9.10% | 8.10% |
| Tax rate | 16.30% - 18.70% | 17.50% |
| Cost of debt | 4.40% - 23.90% | 14.15% |
| WACC | 4.2% - 17.8% | 11.0% |
| Category | Low | High |
| Long-term bond rate | 3.9% | 4.4% |
| Equity market risk premium | 4.6% | 5.6% |
| Adjusted beta | 0.7 | 0.75 |
| Additional risk adjustments | 0.0% | 0.5% |
| Cost of equity | 7.10% | 9.10% |
| Tax rate | 16.30% | 18.70% |
| Debt/Equity ratio | 5.45 | 5.45 |
| Cost of debt | 4.40% | 23.90% |
| After-tax WACC | 4.2% | 17.8% |
| Selected WACC | 11.0% | |
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 RITM:
cost_of_equity (8.10%) = risk_free_rate (4.15%) + equity_risk_premium (5.10%) * adjusted_beta (0.7) + 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.