NVR WACC - Weighted Average Cost of Capital
The WACC of NVR Inc (NVR) is 7.4%.
| Range | Selected | |
| Cost of equity | 6.7% - 8.5% | 7.6% |
| Tax rate | 19.3% - 21.2% | 20.25% |
| Cost of debt | 4.0% - 4.5% | 4.25% |
| WACC | 6.6% - 8.3% | 7.4% |
| Category | Low | High |
| Long-term bond rate | 3.9% | 4.4% |
| Equity market risk premium | 4.6% | 5.6% |
| Adjusted beta | 0.62 | 0.65 |
| Additional risk adjustments | 0.0% | 0.5% |
| Cost of equity | 6.7% | 8.5% |
| Tax rate | 19.3% | 21.2% |
| Debt/Equity ratio | 0.04 | 0.04 |
| Cost of debt | 4.0% | 4.5% |
| After-tax WACC | 6.6% | 8.3% |
| Selected WACC | 7.4% | |
| Debt/Equity | Unlevered | |||
| Peers | Company Name | ratio | Beta | beta |
| NVR | NVR Inc | 0.04 | 0.14 | 0.14 |
| BLD | TopBuild Corp | 0.16 | 0.81 | 0.72 |
| CCS | Century Communities Inc | 0.89 | 0.38 | 0.22 |
| KBH | KB Home | 0.44 | 0.46 | 0.34 |
| MDC | MDC Holdings Inc | 0.36 | 2 | 1.55 |
| MTH | Meritage Homes Corp | 0.27 | 0.53 | 0.43 |
| PHM | Pultegroup Inc | 0.1 | 0.45 | 0.42 |
| TMHC | Taylor Morrison Home Corp | 0.36 | 0.65 | 0.5 |
| TOL | Toll Brothers Inc | 0.28 | 0.86 | 0.7 |
| TPH | Tri Pointe Homes Inc (Delaware) | 0.36 | 0.54 | 0.42 |
| Low | High | |
| Unlevered beta | 0.42 | 0.46 |
| Relevered beta | 0.43 | 0.48 |
| Adjusted relevered beta | 0.62 | 0.65 |
NVR'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 NVR:
cost_of_equity (7.60%) = risk_free_rate (4.15%) + equity_risk_premium (5.10%) * adjusted_beta (0.62) + 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.