AVB
Avalonbay Communities Inc
Price:  
204.45 
USD
Volume:  
744,884.00
United States | Equity Real Estate Investment Trusts (REITs)
Valuation
Overview
Financials
Forecast
Compare
Historical Price
SolvencyDividends
Transactions
People

AVB WACC - Weighted Average Cost of Capital

The WACC of Avalonbay Communities Inc (AVB) is 7.0%.

The Cost of Equity of Avalonbay Communities Inc (AVB) is 7.75%.
The Cost of Debt of Avalonbay Communities Inc (AVB) is 4.45%.

Range Selected
Cost of equity 6.70% - 8.80% 7.75%
Tax rate 0.50% - 0.80% 0.65%
Cost of debt 4.00% - 4.90% 4.45%
WACC 6.1% - 8.0% 7.0%
WACC

AVB WACC calculation

Category Low High
Long-term bond rate 3.9% 4.4%
Equity market risk premium 4.6% 5.6%
Adjusted beta 0.61 0.7
Additional risk adjustments 0.0% 0.5%
Cost of equity 6.70% 8.80%
Tax rate 0.50% 0.80%
Debt/Equity ratio 0.27 0.27
Cost of debt 4.00% 4.90%
After-tax WACC 6.1% 8.0%
Selected WACC 7.0%

AVB'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 AVB:

cost_of_equity (7.75%) = risk_free_rate (4.15%) + equity_risk_premium (5.10%) * adjusted_beta (0.61) + 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.