SAR WACC - Weighted Average Cost of Capital
The WACC of Saratoga Investment Corp (SAR) is 8.6%.
| Range | Selected | |
| Cost of equity | 7.3% - 9.7% | 8.5% |
| Tax rate | 4.3% - 6.6% | 5.45% |
| Cost of debt | 5.9% - 12.4% | 9.15% |
| WACC | 6.2% - 11.0% | 8.6% |
| Category | Low | High |
| Long-term bond rate | 3.9% | 4.4% |
| Equity market risk premium | 4.6% | 5.6% |
| Adjusted beta | 0.75 | 0.87 |
| Additional risk adjustments | 0.0% | 0.5% |
| Cost of equity | 7.3% | 9.7% |
| Tax rate | 4.3% | 6.6% |
| Debt/Equity ratio | 2.44 | 2.44 |
| Cost of debt | 5.9% | 12.4% |
| After-tax WACC | 6.2% | 11.0% |
| Selected WACC | 8.6% | |
| Debt/Equity | Unlevered | |||
| Peers | Company Name | ratio | Beta | beta |
| SAR | Saratoga Investment Corp | 2.44 | 0.39 | 0.12 |
| BKCC | BlackRock Capital Investment Corp | 1.09 | 0.53 | 0.26 |
| DLCG.V | Dominion Lending Centres Inc | 0.83 | 1.51 | 0.84 |
| GLAD | Gladstone Capital Corp | 0.58 | 0.71 | 0.46 |
| HRZN | Horizon Technology Finance Corp | 1.53 | 0.8 | 0.32 |
| MRCC | Monroe Capital Corp | 2.1 | 0.57 | 0.19 |
| OXSQ | Oxford Square Capital Corp | 0.71 | 0.32 | 0.19 |
| PTMN | Portman Ridge Finance Corp | 2.38 | 0.27 | 0.08 |
| SCM | Stellus Capital Investment Corp | 1.59 | 0.57 | 0.23 |
| WHF | WhiteHorse Finance Inc | 1.64 | 0.36 | 0.14 |
| Low | High | |
| Unlevered beta | 0.19 | 0.24 |
| Relevered beta | 0.63 | 0.81 |
| Adjusted relevered beta | 0.75 | 0.87 |
SAR'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 SAR:
cost_of_equity (8.50%) = risk_free_rate (4.15%) + equity_risk_premium (5.10%) * adjusted_beta (0.75) + 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.