Alabama Aircraft - WACC Analysis

Alabama Aircraft (Weighted Average Cost of Capital (WACC) Analysis)



Helpful Information for Alabama Aircraft's Analysis

What is the WACC Formula? Analyst use the WACC Discount Rate (weighted average cost of capital) to determine Alabama Aircraft's investment risk. WACC Formula = Cost of Equity (CAPM) * Common Equity + (Cost of Debt) * Total Debt. The result of this calculation is an essential input for the discounted cash flow (DCF) analysis for Alabama Aircraft. Value Investing Importance? This method is widely used by investment professionals to determine the correct price for investments in Alabama Aircraft before they make value investing decisions. This WACC analysis is used in Alabama Aircraft's discounted cash flow (DCF) valuation and see how the WACC calculation affect's Alabama Aircraft's company valuation.

WACC Analysis Information

1. The WACC (discount rate) calculation for Alabama Aircraft uses comparable companies to produce a single WACC (discount rate). An industry average WACC (discount rate) is the most accurate for Alabama Aircraft over the long term. If there are any short-term differences between the industry WACC and Alabama Aircraft's WACC (discount rate), then Alabama Aircraft is more likely to revert to the industry WACC (discount rate) over the long term.

2. The WACC calculation uses the higher of Alabama Aircraft's WACC or the risk free rate, because no investment can have a cost of capital that is better than risk free. This situation may occur if the beta is negative and Alabama Aircraft uses a significant proportion of equity capital.