TEAF WACC - Weighted Average Cost of Capital
The WACC of Tortoise Essential Assets Income Term Fund (TEAF) is 8.9%.
| Range | Selected | |
| Cost of equity | 8.0% - 11.2% | 9.6% |
| Tax rate | 1.4% - 1.8% | 1.6% |
| Cost of debt | 4.0% - 7.0% | 5.5% |
| WACC | 7.3% - 10.5% | 8.9% |
| Category | Low | High |
| Long-term bond rate | 3.9% | 4.4% |
| Equity market risk premium | 4.6% | 5.6% |
| Adjusted beta | 0.9 | 1.14 |
| Additional risk adjustments | 0.0% | 0.5% |
| Cost of equity | 8.0% | 11.2% |
| Tax rate | 1.4% | 1.8% |
| Debt/Equity ratio | 0.2 | 0.2 |
| Cost of debt | 4.0% | 7.0% |
| After-tax WACC | 7.3% | 10.5% |
| Selected WACC | 8.9% | |
| Debt/Equity | Unlevered | |||
| Peers | Company Name | ratio | Beta | beta |
| TEAF | Tortoise Essential Assets Income Term Fund | 0.2 | 3.55 | 2.97 |
| ESSC | East Stone Acquisition Corp | 0.05 | 1.05 | 1 |
| GIX | GigCapital2 Inc | 0 | 1.05 | 1.04 |
| NNAX | New Momentum Corp | 0.42 | -0.63 | -0.45 |
| Low | High | |
| Unlevered beta | 1.01 | 1.04 |
| Relevered beta | 0.85 | 1.21 |
| Adjusted relevered beta | 0.9 | 1.14 |
TEAF'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 TEAF:
cost_of_equity (9.60%) = risk_free_rate (4.15%) + equity_risk_premium (5.10%) * adjusted_beta (0.9) + 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.