PAG
Penske Automotive Group Inc
Price:  
180.92 
USD
Volume:  
245,244
United States | Specialty Retail

PAG WACC - Weighted Average Cost of Capital

The WACC of Penske Automotive Group Inc (PAG) is 6.3%.

The Cost of Equity of Penske Automotive Group Inc (PAG) is 7.7%.
The Cost of Debt of Penske Automotive Group Inc (PAG) is 4.55%.

RangeSelected
Cost of equity6.7% - 8.7%7.7%
Tax rate25.4% - 25.5%25.45%
Cost of debt4.0% - 5.1%4.55%
WACC5.5% - 7.1%6.3%
WACC

PAG WACC calculation

CategoryLowHigh
Long-term bond rate3.9%4.4%
Equity market risk premium4.6%5.6%
Adjusted beta0.620.68
Additional risk adjustments0.0%0.5%
Cost of equity6.7%8.7%
Tax rate25.4%25.5%
Debt/Equity ratio
0.490.49
Cost of debt4.0%5.1%
After-tax WACC5.5%7.1%
Selected WACC6.3%

PAG'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 PAG:

cost_of_equity (7.70%) = 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.