Dr Pepper Snapple - WACC Analysis

Dr Pepper Snapple (Weighted Average Cost of Capital (WACC) Analysis)



Helpful Information for Dr Pepper Snapple's Analysis

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

WACC Analysis Information

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

2. The WACC calculation uses the higher of Dr Pepper Snapple'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 Dr Pepper Snapple uses a significant proportion of equity capital.