California Pizza Kitchen - WACC Analysis

California Pizza Kitchen (Weighted Average Cost of Capital (WACC) Analysis)



Helpful Information for California Pizza Kitchen's Analysis

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

WACC Analysis Information

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

2. The WACC calculation uses the higher of California Pizza Kitchen'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 California Pizza Kitchen uses a significant proportion of equity capital.