LGIH
LGI Homes Inc
Price:  
55.31 
USD
Volume:  
184,921.00
United States | Household Durables
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LGIH WACC - Weighted Average Cost of Capital

The WACC of LGI Homes Inc (LGIH) is 7.4%.

The Cost of Equity of LGI Homes Inc (LGIH) is 9.80%.
The Cost of Debt of LGI Homes Inc (LGIH) is 6.90%.

Range Selected
Cost of equity 8.10% - 11.50% 9.80%
Tax rate 21.50% - 22.70% 22.10%
Cost of debt 6.30% - 7.50% 6.90%
WACC 6.4% - 8.4% 7.4%
WACC

LGIH WACC calculation

Category Low High
Long-term bond rate 3.9% 4.4%
Equity market risk premium 4.6% 5.6%
Adjusted beta 0.92 1.18
Additional risk adjustments 0.0% 0.5%
Cost of equity 8.10% 11.50%
Tax rate 21.50% 22.70%
Debt/Equity ratio 1.17 1.17
Cost of debt 6.30% 7.50%
After-tax WACC 6.4% 8.4%
Selected WACC 7.4%

LGIH'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 LGIH:

cost_of_equity (9.80%) = risk_free_rate (4.15%) + equity_risk_premium (5.10%) * adjusted_beta (0.92) + 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.