VEL
Velocity Financial Inc
Price:  
18.64 
USD
Volume:  
77,229.00
United States | Thrifts & Mortgage Finance
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VEL WACC - Weighted Average Cost of Capital

The WACC of Velocity Financial Inc (VEL) is 7.6%.

The Cost of Equity of Velocity Financial Inc (VEL) is 15.15%.
The Cost of Debt of Velocity Financial Inc (VEL) is 8.95%.

Range Selected
Cost of equity 11.90% - 18.40% 15.15%
Tax rate 26.60% - 26.70% 26.65%
Cost of debt 5.50% - 12.40% 8.95%
WACC 5.0% - 10.2% 7.6%
WACC

VEL WACC calculation

Category Low High
Long-term bond rate 3.9% 4.4%
Equity market risk premium 4.6% 5.6%
Adjusted beta 1.76 2.41
Additional risk adjustments 0.0% 0.5%
Cost of equity 11.90% 18.40%
Tax rate 26.60% 26.70%
Debt/Equity ratio 7.14 7.14
Cost of debt 5.50% 12.40%
After-tax WACC 5.0% 10.2%
Selected WACC 7.6%

VEL'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 VEL:

cost_of_equity (15.15%) = risk_free_rate (4.15%) + equity_risk_premium (5.10%) * adjusted_beta (1.76) + 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.