SHO
Sunstone Hotel Investors Inc
Price:  
8.73 
USD
Volume:  
3,242,597.00
United States | Equity Real Estate Investment Trusts (REITs)
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SHO WACC - Weighted Average Cost of Capital

The WACC of Sunstone Hotel Investors Inc (SHO) is 8.1%.

The Cost of Equity of Sunstone Hotel Investors Inc (SHO) is 8.55%.
The Cost of Debt of Sunstone Hotel Investors Inc (SHO) is 7.20%.

Range Selected
Cost of equity 7.50% - 9.60% 8.55%
Tax rate 1.10% - 1.80% 1.45%
Cost of debt 5.30% - 9.10% 7.20%
WACC 6.8% - 9.4% 8.1%
WACC

SHO WACC calculation

Category Low High
Long-term bond rate 3.9% 4.4%
Equity market risk premium 4.6% 5.6%
Adjusted beta 0.8 0.84
Additional risk adjustments 0.0% 0.5%
Cost of equity 7.50% 9.60%
Tax rate 1.10% 1.80%
Debt/Equity ratio 0.48 0.48
Cost of debt 5.30% 9.10%
After-tax WACC 6.8% 9.4%
Selected WACC 8.1%

SHO'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 SHO:

cost_of_equity (8.55%) = risk_free_rate (4.15%) + equity_risk_premium (5.10%) * adjusted_beta (0.8) + 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.