Bare Escentuals - WACC Analysis

Bare Escentuals (Weighted Average Cost of Capital (WACC) Analysis)



Helpful Information for Bare Escentuals's Analysis

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

WACC Analysis Information

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

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