Corrections of America - WACC Analysis

Corrections of America (Weighted Average Cost of Capital (WACC) Analysis)



Helpful Information for Corrections of America's Analysis

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

WACC Analysis Information

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

2. The WACC calculation uses the higher of Corrections of America'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 Corrections of America uses a significant proportion of equity capital.