TIPT WACC - Weighted Average Cost of Capital
The WACC of Tiptree Inc (TIPT) is 7.1%.
| Range | Selected | |
| Cost of equity | 7.1% - 10.5% | 8.8% |
| Tax rate | 37.8% - 45.5% | 41.65% |
| Cost of debt | 5.1% - 8.3% | 6.7% |
| WACC | 5.7% - 8.4% | 7.1% |
| Category | Low | High |
| Long-term bond rate | 3.9% | 4.4% |
| Equity market risk premium | 4.6% | 5.6% |
| Adjusted beta | 0.7 | 1 |
| Additional risk adjustments | 0.0% | 0.5% |
| Cost of equity | 7.1% | 10.5% |
| Tax rate | 37.8% | 45.5% |
| Debt/Equity ratio | 0.52 | 0.52 |
| Cost of debt | 5.1% | 8.3% |
| After-tax WACC | 5.7% | 8.4% |
| Selected WACC | 7.1% | |
| Debt/Equity | Unlevered | |||
| Peers | Company Name | ratio | Beta | beta |
| TIPT | Tiptree Inc | 0.52 | 0.48 | 0.37 |
| AMBC | Ambac Financial Group Inc | 0.37 | 0.97 | 0.8 |
| DGICA | Donegal Group Inc | 0.05 | 0.21 | 0.2 |
| EIG | Employers Holdings Inc | 0 | 0.41 | 0.41 |
| HRTG | Heritage Insurance Holdings Inc | 0.18 | 0.95 | 0.86 |
| JRVR | James River Group Holdings Ltd | 1.39 | 1.36 | 0.75 |
| KINS | Kingstone Companies Inc | 0.05 | 1.06 | 1.03 |
| UFCS | United Fire Group Inc | 0.16 | 0.92 | 0.84 |
| UIHC | United Insurance Holdings Corp | 0.44 | 0.54 | 0.43 |
| UVE | Universal Insurance Holdings Inc | 0.14 | 0.4 | 0.37 |
| Low | High | |
| Unlevered beta | 0.42 | 0.77 |
| Relevered beta | 0.55 | 1 |
| Adjusted relevered beta | 0.7 | 1 |
TIPT'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 TIPT:
cost_of_equity (8.80%) = risk_free_rate (4.15%) + equity_risk_premium (5.10%) * adjusted_beta (0.7) + 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.