First Busey - WACC Analysis

First Busey (Weighted Average Cost of Capital (WACC) Analysis)



Helpful Information for First Busey's Analysis

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

WACC Analysis Information

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

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