SVC WACC - Weighted Average Cost of Capital

The WACC of Service Properties Trust (SVC) is 13.5%.

The Cost of Equity of Service Properties Trust (SVC) is 18.60%.

The Cost of Debt of Service Properties Trust (SVC) is 13.40%.

	Range	Selected
Cost of equity	9.90% - 27.30%	18.60%
Tax rate	0.40% - 2.30%	1.35%
Cost of debt	5.90% - 20.90%	13.40%
WACC	6.1% - 20.8%	13.5%

WACC

SVC WACC calculation

Category	Low	High

Long-term bond rate	3.9%	4.4%
Equity market risk premium	4.6%	5.6%
Adjusted beta	1.31	4

Additional risk adjustments	0.0%	0.5%
Cost of equity	9.90%	27.30%

Tax rate	0.40%	2.30%
Debt/Equity ratio	15.37	15.37
Cost of debt	5.90%	20.90%

After-tax WACC	6.1%	20.8%


Selected WACC	13.5%

SVC'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 SVC:

cost_of_equity (18.60%) = risk_free_rate (4.15%) + equity_risk_premium (5.10%) * adjusted_beta (1.31) + 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.