First Community Banc - WACC Analysis

First Community Banc (Weighted Average Cost of Capital (WACC) Analysis)



Helpful Information for First Community Banc's Analysis

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

WACC Analysis Information

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

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