AIV WACC - Weighted Average Cost of Capital

The WACC of Apartment Investment and Management Co (AIV) is 8.5%.

The Cost of Equity of Apartment Investment and Management Co (AIV) is 7.40%.

The Cost of Debt of Apartment Investment and Management Co (AIV) is 13.95%.

	Range	Selected
Cost of equity	6.30% - 8.50%	7.40%
Tax rate	13.60% - 34.90%	24.25%
Cost of debt	4.00% - 23.90%	13.95%
WACC	4.8% - 12.1%	8.5%

WACC

AIV WACC calculation

Category	Low	High

Long-term bond rate	3.9%	4.4%
Equity market risk premium	4.6%	5.6%
Adjusted beta	0.52	0.66

Additional risk adjustments	0.0%	0.5%
Cost of equity	6.30%	8.50%

Tax rate	13.60%	34.90%
Debt/Equity ratio	1.02	1.02
Cost of debt	4.00%	23.90%

After-tax WACC	4.8%	12.1%


Selected WACC	8.5%

AIV'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 AIV:

cost_of_equity (7.40%) = risk_free_rate (4.15%) + equity_risk_premium (5.10%) * adjusted_beta (0.52) + 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.