VRM
Vroom Inc
Price:  
37.71 
USD
Volume:  
1,839.00
United States | Specialty Retail
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VRM WACC - Weighted Average Cost of Capital

The WACC of Vroom Inc (VRM) is 6.9%.

The Cost of Equity of Vroom Inc (VRM) is 75.40%.
The Cost of Debt of Vroom Inc (VRM) is 6.15%.

Range Selected
Cost of equity 46.80% - 104.00% 75.40%
Tax rate 0.10% - 0.20% 0.15%
Cost of debt 5.30% - 7.00% 6.15%
WACC 5.7% - 8.1% 6.9%
WACC

VRM WACC calculation

Category Low High
Long-term bond rate 3.9% 4.4%
Equity market risk premium 4.6% 5.6%
Adjusted beta 9.34 17.7
Additional risk adjustments 0.0% 0.5%
Cost of equity 46.80% 104.00%
Tax rate 0.10% 0.20%
Debt/Equity ratio 85.3 85.3
Cost of debt 5.30% 7.00%
After-tax WACC 5.7% 8.1%
Selected WACC 6.9%

VRM'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 VRM:

cost_of_equity (75.40%) = risk_free_rate (4.15%) + equity_risk_premium (5.10%) * adjusted_beta (9.34) + 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.