Carmax Inc (KMX) WACC Analysis

As of May 24, 2025, Carmax Inc (KMX) carries a Weighted Average Cost of Capital (WACC) of 6.1%. WACC reflects the blended rate Carmax Inc must pay to both equity and debt holders.

Within that, the cost of equity is 7.2%, the cost of debt is 4.0%, and the effective tax rate is 23.5%.

Breakdown of WACC Components

• Long-term bond rate: 3.9% – 4.4%
• Equity market risk premium: 4.6% – 5.6%
• Adjusted beta: 0.72 – 0.79
• Additional risk adjustment: 0.0% – 0.5%
• Debt-to-equity ratio: 1.99

What It Means for Investors

With a selected WACC of 6.1%, Carmax Inc must ensure any new investment returns exceed this threshold to generate shareholder value. This level reflects an attractive low cost of capital.