CAR WACC - Weighted Average Cost of Capital

The WACC of Avis Budget Group Inc (CAR) is 8.5%.

The Cost of Equity of Avis Budget Group Inc (CAR) is 13.35%.

The Cost of Debt of Avis Budget Group Inc (CAR) is 10.15%.

	Range	Selected
Cost of equity	10.80% - 15.90%	13.35%
Tax rate	24.60% - 26.30%	25.45%
Cost of debt	4.70% - 15.60%	10.15%
WACC	4.8% - 12.3%	8.5%

WACC

CAR WACC calculation

Category	Low	High

Long-term bond rate	3.9%	4.4%
Equity market risk premium	4.6%	5.6%
Adjusted beta	1.51	1.96

Additional risk adjustments	0.0%	0.5%
Cost of equity	10.80%	15.90%

Tax rate	24.60%	26.30%
Debt/Equity ratio	4.97	4.97
Cost of debt	4.70%	15.60%

After-tax WACC	4.8%	12.3%


Selected WACC	8.5%

CAR'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 CAR:

cost_of_equity (13.35%) = risk_free_rate (4.15%) + equity_risk_premium (5.10%) * adjusted_beta (1.51) + 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.