HOV
Hovnanian Enterprises Inc
Price:  
104.55 
USD
Volume:  
222,986.00
United States | Household Durables
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HOV WACC - Weighted Average Cost of Capital

The WACC of Hovnanian Enterprises Inc (HOV) is 6.4%.

The Cost of Equity of Hovnanian Enterprises Inc (HOV) is 10.75%.
The Cost of Debt of Hovnanian Enterprises Inc (HOV) is 4.70%.

Range Selected
Cost of equity 8.80% - 12.70% 10.75%
Tax rate 22.00% - 26.00% 24.00%
Cost of debt 4.50% - 4.90% 4.70%
WACC 5.6% - 7.1% 6.4%
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 1.08 1.4
Additional risk adjustments 0.0% 0.5%
Cost of equity 8.80% 12.70%
Tax rate 22.00% 26.00%
Debt/Equity ratio 1.59 1.59
Cost of debt 4.50% 4.90%
After-tax WACC 5.6% 7.1%
Selected WACC 6.4%

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 (10.75%) = risk_free_rate (4.15%) + equity_risk_premium (5.10%) * adjusted_beta (1.08) + 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.