CVNA
Carvana Co
Price:  
304.11 
USD
Volume:  
2,540,455.00
United States | Specialty Retail
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Carvana WACC - Weighted Average Cost of Capital

The WACC of Carvana Co (CVNA) is 7.2%.

The Cost of Equity of Carvana Co (CVNA) is 7.35%.
The Cost of Debt of Carvana Co (CVNA) is 5.55%.

Range Selected
Cost of equity 6.40% - 8.30% 7.35%
Tax rate 0.20% - 0.60% 0.40%
Cost of debt 4.90% - 6.20% 5.55%
WACC 6.3% - 8.1% 7.2%
WACC

Carvana WACC calculation

Category Low High
Long-term bond rate 3.9% 4.4%
Equity market risk premium 4.6% 5.6%
Adjusted beta 0.56 0.62
Additional risk adjustments 0.0% 0.5%
Cost of equity 6.40% 8.30%
Tax rate 0.20% 0.60%
Debt/Equity ratio 0.09 0.09
Cost of debt 4.90% 6.20%
After-tax WACC 6.3% 8.1%
Selected WACC 7.2%

Carvana'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 Carvana:

cost_of_equity (7.35%) = risk_free_rate (4.15%) + equity_risk_premium (5.10%) * adjusted_beta (0.56) + 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.