Eagle Materials - WACC Analysis

Eagle Materials (Weighted Average Cost of Capital (WACC) Analysis)



Helpful Information for Eagle Materials's Analysis

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

WACC Analysis Information

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

2. The WACC calculation uses the higher of Eagle Materials'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 Eagle Materials uses a significant proportion of equity capital.