Community Trust - WACC Analysis

Community Trust (Weighted Average Cost of Capital (WACC) Analysis)



Helpful Information for Community Trust's Analysis

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

WACC Analysis Information

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

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