THQ WACC - Weighted Average Cost of Capital
The WACC of Tekla Healthcare Opportunities Fund (THQ) is 8.5%.
| Range | Selected | |
| Cost of equity | 8.9% - 11.1% | 10% |
| Tax rate | 26.2% - 27.0% | 26.6% |
| Cost of debt | 5.0% - 5.0% | 5% |
| WACC | 7.7% - 9.4% | 8.5% |
| Category | Low | High |
| Long-term bond rate | 3.9% | 4.4% |
| Equity market risk premium | 4.6% | 5.6% |
| Adjusted beta | 1.1 | 1.11 |
| Additional risk adjustments | 0.0% | 0.5% |
| Cost of equity | 8.9% | 11.1% |
| Tax rate | 26.2% | 27.0% |
| Debt/Equity ratio | 0.3 | 0.3 |
| Cost of debt | 5.0% | 5.0% |
| After-tax WACC | 7.7% | 9.4% |
| Selected WACC | 8.5% | |
| Debt/Equity | Unlevered | |||
| Peers | Company Name | ratio | Beta | beta |
| THQ | Tekla Healthcare Opportunities Fund | 0.3 | 3.55 | 2.91 |
| APSG | Apollo Strategic Growth Capital | 0.01 | 0.96 | 0.96 |
| CCX | Churchill Capital Corp II | 0 | 0.94 | 0.93 |
| NID | Nuveen Intermediate Duration Municipal Term Fund | 0.05 | 0.25 | 0.24 |
| THCBU | Tuscan Holdings Corp | 0 | 0.98 | 0.98 |
| Low | High | |
| Unlevered beta | 0.95 | 0.97 |
| Relevered beta | 1.15 | 1.16 |
| Adjusted relevered beta | 1.1 | 1.11 |
THQ'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 THQ:
cost_of_equity (10.00%) = risk_free_rate (4.15%) + equity_risk_premium (5.10%) * adjusted_beta (1.1) + 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.