AutoNation WACC - Weighted Average Cost of Capital
The WACC of AutoNation Inc (AN) is 7.1%.
| Range | Selected | |
| Cost of equity | 7.4% - 9.9% | 8.65% |
| Tax rate | 24.5% - 24.6% | 24.55% |
| Cost of debt | 6.1% - 6.8% | 6.45% |
| WACC | 6.3% - 8.0% | 7.1% |
| Category | Low | High |
| Long-term bond rate | 3.9% | 4.4% |
| Equity market risk premium | 4.6% | 5.6% |
| Adjusted beta | 0.76 | 0.9 |
| Additional risk adjustments | 0.0% | 0.5% |
| Cost of equity | 7.4% | 9.9% |
| Tax rate | 24.5% | 24.6% |
| Debt/Equity ratio | 0.66 | 0.66 |
| Cost of debt | 6.1% | 6.8% |
| After-tax WACC | 6.3% | 8.0% |
| Selected WACC | 7.1% | |
| Debt/Equity | Unlevered | |||
| Peers | Company Name | ratio | Beta | beta |
| AN | AutoNation Inc | 0.66 | 0.89 | 0.6 |
| ABG | Asbury Automotive Group Inc | 1.13 | 1.01 | 0.54 |
| CWH | Camping World Holdings Inc | 1.7 | 1.8 | 0.79 |
| GPI | Group 1 Automotive Inc | 0.9 | 0.66 | 0.39 |
| GPS | Gap Inc | 0.16 | 1.43 | 1.28 |
| KMX | Carmax Inc | 1.92 | 0.5 | 0.2 |
| LAD | Lithia Motors Inc | 1.61 | 0.82 | 0.37 |
| MUSA | Murphy Usa Inc | 0.22 | 0.32 | 0.28 |
| PAG | Penske Automotive Group Inc | 0.54 | 0.64 | 0.46 |
| TA | Travelcenters of America Inc | 0.44 | 0.88 | 0.66 |
| Low | High | |
| Unlevered beta | 0.43 | 0.56 |
| Relevered beta | 0.64 | 0.85 |
| Adjusted relevered beta | 0.76 | 0.9 |
AutoNation'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 AutoNation:
cost_of_equity (8.65%) = risk_free_rate (4.15%) + equity_risk_premium (5.10%) * adjusted_beta (0.76) + 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.