The WACC of iStar Inc (STAR) is 6.9%.
| Range | Selected | |
| Cost of equity | 7.60% - 12.90% | 10.25% |
| Tax rate | 0.50% - 1.80% | 1.15% |
| Cost of debt | 4.30% - 7.00% | 5.65% |
| WACC | 5.2% - 8.6% | 6.9% |
| Category | Low | High |
| Long-term bond rate | 4.2% | 4.7% |
| Equity market risk premium | 5.0% | 6.0% |
| Adjusted beta | 0.68 | 1.29 |
| Additional risk adjustments | 0.0% | 0.5% |
| Cost of equity | 7.60% | 12.90% |
| Tax rate | 0.50% | 1.80% |
| Debt/Equity ratio | 2.54 | 2.54 |
| Cost of debt | 4.30% | 7.00% |
| After-tax WACC | 5.2% | 8.6% |
| Selected WACC | 6.9% | |
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 iStar:
cost_of_equity (10.25%) = risk_free_rate (4.45%) + equity_risk_premium (5.50%) * adjusted_beta (0.68) + 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.