SVC
Service Properties Trust
Price:  
2.35 
USD
Volume:  
1,439,368.00
United States | Equity Real Estate Investment Trusts (REITs)
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SVC WACC - Weighted Average Cost of Capital

The WACC of Service Properties Trust (SVC) is 13.0%.

The Cost of Equity of Service Properties Trust (SVC) is 12.60%.
The Cost of Debt of Service Properties Trust (SVC) is 13.25%.

Range Selected
Cost of equity 8.60% - 16.60% 12.60%
Tax rate 0.40% - 2.30% 1.35%
Cost of debt 5.60% - 20.90% 13.25%
WACC 5.8% - 20.1% 13.0%
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 1.03 2.09
Additional risk adjustments 0.0% 0.5%
Cost of equity 8.60% 16.60%
Tax rate 0.40% 2.30%
Debt/Equity ratio 14.58 14.58
Cost of debt 5.60% 20.90%
After-tax WACC 5.8% 20.1%
Selected WACC 13.0%

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 (12.60%) = risk_free_rate (4.15%) + equity_risk_premium (5.10%) * adjusted_beta (1.03) + 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.