AAN WACC - Weighted Average Cost of Capital

The WACC of Aaron's Company Inc (AAN) is 11.6%.

The Cost of Equity of Aaron's Company Inc (AAN) is 8.90%.

The Cost of Debt of Aaron's Company Inc (AAN) is 28.60%.

	Range	Selected
Cost of equity	7.50% - 10.30%	8.90%
Tax rate	29.70% - 45.70%	37.70%
Cost of debt	7.00% - 50.20%	28.60%
WACC	6.5% - 16.7%	11.6%

WACC

AAN WACC calculation

Category	Low	High

Long-term bond rate	3.9%	4.4%
Equity market risk premium	4.6%	5.6%
Adjusted beta	0.78	0.97

Additional risk adjustments	0.0%	0.5%
Cost of equity	7.50%	10.30%

Tax rate	29.70%	45.70%
Debt/Equity ratio	0.61	0.61
Cost of debt	7.00%	50.20%

After-tax WACC	6.5%	16.7%


Selected WACC	11.6%

AAN'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 AAN:

cost_of_equity (8.90%) = risk_free_rate (4.15%) + equity_risk_premium (5.10%) * adjusted_beta (0.78) + 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.