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CACC (Credit Acceptance) WACC % :6.12% (As of Oct. 31, 2024)


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What is Credit Acceptance WACC %?

As of today (2024-10-31), Credit Acceptance's weighted average cost of capital is 6.12%%. Credit Acceptance's ROIC % is 2.47% (calculated using TTM income statement data). Credit Acceptance earns returns that do not match up to its cost of capital. It will destroy value as it grows.

For a comprehensive WACC calculation, please access the WACC Calculator.


Credit Acceptance WACC % Historical Data

The historical data trend for Credit Acceptance's WACC % can be seen below:

* For Operating Data section: All numbers are indicated by the unit behind each term and all currency related amount are in USD.
* For other sections: All numbers are in millions except for per share data, ratio, and percentage. All currency related amount are indicated in the company's associated stock exchange currency.

* Premium members only.

Credit Acceptance WACC % Chart

Credit Acceptance Annual Data
Trend Dec14 Dec15 Dec16 Dec17 Dec18 Dec19 Dec20 Dec21 Dec22 Dec23
WACC %
Get a 7-Day Free Trial Premium Member Only Premium Member Only 4.39 4.87 6.42 7.13 7.31

Credit Acceptance Quarterly Data
Dec19 Mar20 Jun20 Sep20 Dec20 Mar21 Jun21 Sep21 Dec21 Mar22 Jun22 Sep22 Dec22 Mar23 Jun23 Sep23 Dec23 Mar24 Jun24 Sep24
WACC % Get a 7-Day Free Trial Premium Member Only Premium Member Only Premium Member Only Premium Member Only Premium Member Only Premium Member Only Premium Member Only Premium Member Only Premium Member Only Premium Member Only Premium Member Only Premium Member Only 6.72 7.31 7.50 7.03 -

Competitive Comparison of Credit Acceptance's WACC %

For the Credit Services subindustry, Credit Acceptance's WACC %, along with its competitors' market caps and WACC % data, can be viewed below:

* Competitive companies are chosen from companies within the same industry, with headquarter located in same country, with closest market capitalization; x-axis shows the market cap, and y-axis shows the term value; the bigger the dot, the larger the market cap. Note that "N/A" values will not show up in the chart.


Credit Acceptance's WACC % Distribution in the Credit Services Industry

For the Credit Services industry and Financial Services sector, Credit Acceptance's WACC % distribution charts can be found below:

* The bar in red indicates where Credit Acceptance's WACC % falls into.



Credit Acceptance WACC % Calculation

The weighted average cost of capital (WACC) is the rate that a company is expected to pay on average to all its security holders to finance its assets. The WACC is commonly referred to as the firm's cost of capital. Generally speaking, a company's assets are financed by debt and equity. WACC is the average of the costs of these sources of financing, each of which is weighted by its respective use in the given situation. By taking a weighted average, we can see how much interest the company has to pay for every dollar it finances.

WACC=E/(E + D)*Cost of Equity+D/(E + D)*Cost of Debt*(1 - Tax Rate)

1. Weights:
Generally speaking, a company's assets are financed by debt and equity. We need to calculate the weight of equity and the weight of debt.
The market value of equity (E) is also called "Market Cap". As of today, Credit Acceptance's market capitalization (E) is $5147.250 Mil.
The market value of debt is typically difficult to calculate, therefore, GuruFocus uses book value of debt (D) to do the calculation. It is simplified by adding the latest one-year quarterly average Short-Term Debt & Capital Lease Obligation and Long-Term Debt & Capital Lease Obligation together. As of Sep. 2024, Credit Acceptance's latest one-year quarterly average Book Value of Debt (D) is $5563.06 Mil.
a) weight of equity = E / (E + D) = 5147.250 / (5147.250 + 5563.06) = 0.4806
b) weight of debt = D / (E + D) = 5563.06 / (5147.250 + 5563.06) = 0.5194

2. Cost of Equity:
GuruFocus uses Capital Asset Pricing Model (CAPM) to calculate the required rate of return. The formula is:
Cost of Equity = Risk-Free Rate of Return + Beta of Asset * (Expected Return of the Market - Risk-Free Rate of Return)
a) GuruFocus uses 10-Year Treasury Constant Maturity Rate as the risk-free rate. It is updated daily. The current risk-free rate is 4.282%. Please go to Economic Indicators page for more information. Please note that we use the 10-Year Treasury Constant Maturity Rate of the country/region where the company is headquartered. If the data for that country/region is not available, then we will use the 10-Year Treasury Constant Maturity Rate of the United States as default.
b) Beta is the sensitivity of the expected excess asset returns to the expected excess market returns. Credit Acceptance's beta is 1.41.
c) (Expected Return of the Market - Risk-Free Rate of Return) is also called market premium. GuruFocus requires market premium to be 6%.
Cost of Equity = 4.282% + 1.41 * 6% = 12.742%

3. Cost of Debt:
GuruFocus uses latest TTM Interest Expense divided by the latest one-year quarterly average debt to get the simplified cost of debt.
As of Sep. 2024, Credit Acceptance's interest expense (positive number) was $-0 Mil. Its total Book Value of Debt (D) is $5563.06 Mil.
Cost of Debt = -0 / 5563.06 = 0%.

4. Multiply by one minus TTM Tax Rate:
GuruFocus uses the most recent TTM Tax Expense divided by the most recent TTM Pre-Tax Income to calculate the tax rate. The calculated TTM tax rate is limited to between 0% and 100%. If the calculated tax rate is higher than 100%, it is set to 100%. If the calculated tax rate is less than 0%, it is set to 0%.
The latest calculated TTM Tax Rate = 64.4 / 254 = 25.35%.

Credit Acceptance's Weighted Average Cost Of Capital (WACC) for Today is calculated as:

WACC=E / (E + D)*Cost of Equity+D / (E + D)*Cost of Debt*(1 - Tax Rate)
=0.4806*12.742%+0.5194*0%*(1 - 25.35%)
=6.12%

* For Operating Data section: All numbers are indicated by the unit behind each term and all currency related amount are in USD.
* For other sections: All numbers are in millions except for per share data, ratio, and percentage. All currency related amount are indicated in the company's associated stock exchange currency.


Credit Acceptance  (NAS:CACC) WACC % Explanation

Because it costs money to raise capital. A firm that generates higher ROIC % than it costs the company to raise the capital needed for that investment is earning excess returns. A firm that expects to continue generating positive excess returns on new investments in the future will see its value increase as growth increases, whereas a firm that earns returns that do not match up to its cost of capital will destroy value as it grows.

As of today, Credit Acceptance's weighted average cost of capital is 6.12%%. Credit Acceptance's ROIC % is 2.47% (calculated using TTM income statement data). Credit Acceptance earns returns that do not match up to its cost of capital. It will destroy value as it grows.


Be Aware

1. GuruFocus uses book value of debt (D) to do the calculation. It is simplified by adding latest one-year quarterly average Short-Term Debt & Capital Lease Obligation and Long-Term Debt & Capital Lease Obligation together.
For companies that report quarterly, GuruFocus combines all of the most recent year's quarterly debt data from the beginning of the year to the year-end and calculates the average.
For companies that report semi-annually, GuruFocus combines all of the most recent year's semi-annual debt data from the start of the year to the year-end and calculates the average.
For companies that report annually, GuruFocus combines the beginning and ending annual debt data from the most recent year and then calculates the average.

2. The WACC formula discussed above does not include Preferred Stock. Please adjust if preferred stock is considered.

3. (Expected Return of the Market - Risk-Free Rate of Return) is also called market premium. GuruFocus requires market premium to be 6%.

4. GuruFocus uses the latest TTM Interest Expense divided by the latest one-year quarterly average debt to get the simplified cost of debt.


Related Terms

Credit Acceptance Business Description

Traded in Other Exchanges
Address
25505 W. Twelve Mile Road, Southfield, MI, USA, 48034-8339
Credit Acceptance Corp is a consumer finance company that specializes in automobile loans. These loans are offered through a U.S. nationwide network of automobile dealers that benefit from sales of vehicles to consumers who could otherwise not obtain financing. The company also benefits from repeat and referral sales, and from sales to customers responding to advertisements for financing, but qualify for traditional financing. The company derives its revenue from finance charges, premiums earned on the reinsurance of vehicle service contracts, and other fees. Of these, financing charges, including servicing fees, are by far a source of revenue.
Executives
Prescott General Partners Llc 10 percent owner, other: Member of Section 13(d) Group 2200 BUTTS ROAD, SUITE 320, BOCA RATON FL 33431
Thomas W Smith 10 percent owner, other: Member of Section 13(d) Group 2200 BUTTS ROAD, SUITE 320, BOCA RATON FL 33431
Daniel A. Ulatowski officer: Chief Sales Officer 25505 W 12 MILE ROAD, SOUTHFIELD MI 48034
Douglas W Busk officer: Sr. Vice President & Treasurer 25505 WEST TWELVE MILE ROAD, SOUTH FIELD MI 48034
Jonathan Lum officer: Chief Operating Officer 25505 W 12 MILE ROAD, SOUTHFIELD MI 48034
Erin J Kerber officer: Chief Legal Officer 25505 WEST TWELVE MILE RD, SOUTHFIELD MI 48034
Wendy A Rummler officer: Senior VP, Human Resources 25505 WEST TWELVE MILE ROAD, SOUTHFIELD MI 48034
Nicholas J Elliott officer: Chief Alignment Officer 25505 WEST TWELVE MILE RD, SOUTHFIELD MI 48034
Arthur L Smith officer: Chief Analytics Officer 25505 W 12 MILE ROAD, SOUTHFIELD MI 48034
Sean Edward Quinn director C/O CIMPRESS PLC, 275 WYMAN STREET, WALTHAM MA 02451
Scott J Vassalluzzo director, 10 percent owner, other: Member of Section 13(d) Group 2200 BUTTS ROAD, SUITE 320, BOCA RATON FL 33431
Donald A. Foss Irrevocable Trust Dated August 14, 2022 10 percent owner 39395 W. TWELVE MILE ROAD, SUITE 200, FARMINGTON HILLS MI 48331
Andrew K Rostami officer: Chief Mktg and Product Officer 25505 WEST TWELVE MILE ROAD, SOUTHFIELD MI 48034
Ravi Mohan Valiyaveettil officer: Chief Technology Officer 25505 WEST TWELVE MILE RD, SOUTHFIELD MI 48034
Thomas N Tryforos director 323 RAILROAD AVE, GREENWICH CT 06830