RVI WACC - Weighted Average Cost of Capital
The WACC of Retail Value Inc (RVI) is 7.6%.
| Range | Selected | |
| Cost of equity | 9.0% - 11.7% | 10.35% |
| Tax rate | 1.3% - 2.0% | 1.65% |
| Cost of debt | 5.0% - 5.0% | 5% |
| WACC | 7.0% - 8.3% | 7.6% |
| Category | Low | High |
| Long-term bond rate | 3.2% | 3.7% |
| Equity market risk premium | 4.2% | 5.2% |
| Adjusted beta | 1.38 | 1.44 |
| Additional risk adjustments | 0.0% | 0.5% |
| Cost of equity | 9.0% | 11.7% |
| Tax rate | 1.3% | 2.0% |
| Debt/Equity ratio | 1 | 1 |
| Cost of debt | 5.0% | 5.0% |
| After-tax WACC | 7.0% | 8.3% |
| Selected WACC | 7.6% | |
| Debt/Equity | Unlevered | |||
| Peers | Company Name | ratio | Beta | beta |
| RVI | Retail Value Inc | 1.12 | 1.74 | 0.83 |
| ADC | Agree Realty Corp | 0.34 | -0.01 | -0.01 |
| BRX | Brixmor Property Group Inc | 0.69 | 0.73 | 0.43 |
| FRT | Federal Realty Investment Trust | 0.54 | 0.57 | 0.37 |
| KIM | Kimco Realty Corp | 0.59 | 0.7 | 0.44 |
| NNN | National Retail Properties Inc | 0.56 | 0.15 | 0.1 |
| O | Realty Income Corp | 0.51 | 0.06 | 0.04 |
| REG | Regency Centers Corp | 0.34 | 0.35 | 0.27 |
| SPG | Simon Property Group Inc | 0.46 | 0.77 | 0.53 |
| SRC | Spirit Realty Capital Inc | 0.6 | 1.57 | 0.99 |
| Low | High | |
| Unlevered beta | 0.33 | 0.44 |
| Relevered beta | 1.57 | 1.66 |
| Adjusted relevered beta | 1.38 | 1.44 |
RVI'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 RVI:
cost_of_equity (10.35%) = risk_free_rate (3.45%) + equity_risk_premium (4.70%) * adjusted_beta (1.38) + 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.