AmBev - WACC Analysis

AmBev (Weighted Average Cost of Capital (WACC) Analysis)



Helpful Information for AmBev's Analysis

What is the WACC Formula? Analyst use the WACC Discount Rate (weighted average cost of capital) to determine AmBev'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 AmBev. Value Investing Importance? This method is widely used by investment professionals to determine the correct price for investments in AmBev before they make value investing decisions. This WACC analysis is used in AmBev's discounted cash flow (DCF) valuation and see how the WACC calculation affect's AmBev's company valuation.

WACC Analysis Information

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

2. The WACC calculation uses the higher of AmBev'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 AmBev uses a significant proportion of equity capital.