The WACC of Aurora Innovation Inc (AUR) is 7.3%.
Range | Selected | |
Cost of equity | 9.6% - 12.1% | 10.85% |
Tax rate | 26.2% - 27.0% | 26.6% |
Cost of debt | 5.0% - 5.0% | 5% |
WACC | 6.6% - 7.9% | 7.3% |
Category | Low | High |
Long-term bond rate | 3.9% | 4.4% |
Equity market risk premium | 4.6% | 5.6% |
Adjusted beta | 1.24 | 1.3 |
Additional risk adjustments | 0.0% | 0.5% |
Cost of equity | 9.6% | 12.1% |
Tax rate | 26.2% | 27.0% |
Debt/Equity ratio | 1 | 1 |
Cost of debt | 5.0% | 5.0% |
After-tax WACC | 6.6% | 7.9% |
Selected WACC | 7.3% | |
Debt/Equity | Unlevered | |||
Peers | Company Name | ratio | Beta | beta |
AUR | Aurora Innovation Inc | 1.1 | 2.18 | 1.21 |
ACVA | ACV Auctions Inc | 0.04 | 1.25 | 1.21 |
CTAS | Cintas Corp | 0.03 | 0.8 | 0.79 |
DRVN | Driven Brands Holdings Inc | 0.93 | 0.79 | 0.47 |
IAA | IAA Inc | 0.23 | 1.46 | 1.25 |
KAR | KAR Auction Services Inc | 0.08 | 0.89 | 0.83 |
MATW | Matthews International Corp | 0.99 | 1.07 | 0.62 |
Low | High | |
Unlevered beta | 0.81 | 1.06 |
Relevered beta | 1.36 | 1.45 |
Adjusted relevered beta | 1.24 | 1.3 |
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 AUR:
cost_of_equity (10.85%) = risk_free_rate (4.15%) + equity_risk_premium (5.10%) * adjusted_beta (1.24) + 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.