Avon Products - WACC Analysis

Avon Products (Weighted Average Cost of Capital (WACC) Analysis)



Helpful Information for Avon Products's Analysis

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

WACC Analysis Information

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

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