HOV
Hovnanian Enterprises Inc
Price:  
133.59 
USD
Volume:  
120,186.00
United States | Household Durables
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HOV WACC - Weighted Average Cost of Capital

The WACC of Hovnanian Enterprises Inc (HOV) is 6.9%.

The Cost of Equity of Hovnanian Enterprises Inc (HOV) is 11.40%.
The Cost of Debt of Hovnanian Enterprises Inc (HOV) is 4.70%.

Range Selected
Cost of equity 9.60% - 13.20% 11.40%
Tax rate 22.00% - 26.00% 24.00%
Cost of debt 4.50% - 4.90% 4.70%
WACC 6.1% - 7.7% 6.9%
WACC

HOV WACC calculation

Category Low High
Long-term bond rate 3.9% 4.4%
Equity market risk premium 4.6% 5.6%
Adjusted beta 1.25 1.49
Additional risk adjustments 0.0% 0.5%
Cost of equity 9.60% 13.20%
Tax rate 22.00% 26.00%
Debt/Equity ratio 1.37 1.37
Cost of debt 4.50% 4.90%
After-tax WACC 6.1% 7.7%
Selected WACC 6.9%

HOV'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 HOV:

cost_of_equity (11.40%) = risk_free_rate (4.15%) + equity_risk_premium (5.10%) * adjusted_beta (1.25) + 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.