RLJ
RLJ Lodging Trust
Price:  
7.70 
USD
Volume:  
1,750,701.00
United States | Equity Real Estate Investment Trusts (REITs)
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RLJ WACC - Weighted Average Cost of Capital

The WACC of RLJ Lodging Trust (RLJ) is 9.2%.

The Cost of Equity of RLJ Lodging Trust (RLJ) is 11.55%.
The Cost of Debt of RLJ Lodging Trust (RLJ) is 8.20%.

Range Selected
Cost of equity 10.10% - 13.00% 11.55%
Tax rate 2.00% - 2.70% 2.35%
Cost of debt 4.00% - 12.40% 8.20%
WACC 6.0% - 12.4% 9.2%
WACC

RLJ WACC calculation

Category Low High
Long-term bond rate 3.9% 4.4%
Equity market risk premium 4.6% 5.6%
Adjusted beta 1.36 1.45
Additional risk adjustments 0.0% 0.5%
Cost of equity 10.10% 13.00%
Tax rate 2.00% 2.70%
Debt/Equity ratio 1.91 1.91
Cost of debt 4.00% 12.40%
After-tax WACC 6.0% 12.4%
Selected WACC 9.2%

RLJ'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 RLJ:

cost_of_equity (11.55%) = risk_free_rate (4.15%) + equity_risk_premium (5.10%) * adjusted_beta (1.36) + 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.