CARG
CarGurus Inc
Price:  
31.34 
USD
Volume:  
812,952
United States | Interactive Media & Services

CARG WACC - Weighted Average Cost of Capital

The WACC of CarGurus Inc (CARG) is 5.4%.

The Cost of Equity of CarGurus Inc (CARG) is 7.5%.
The Cost of Debt of CarGurus Inc (CARG) is 4.5%.

RangeSelected
Cost of equity6.0% - 9.0%7.5%
Tax rate24.4% - 27.3%25.85%
Cost of debt4.5% - 4.5%4.5%
WACC4.7% - 6.1%5.4%
WACC

CARG WACC calculation

CategoryLowHigh
Long-term bond rate3.9%4.4%
Equity market risk premium4.6%5.6%
Adjusted beta0.450.74
Additional risk adjustments0.0%0.5%
Cost of equity6.0%9.0%
Tax rate24.4%27.3%
Debt/Equity ratio
11
Cost of debt4.5%4.5%
After-tax WACC4.7%6.1%
Selected WACC5.4%

CARG'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 CARG:

cost_of_equity (7.50%) = risk_free_rate (4.15%) + equity_risk_premium (5.10%) * adjusted_beta (0.45) + 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.