Forward Air - WACC Analysis

Forward Air (Weighted Average Cost of Capital (WACC) Analysis)



Helpful Information for Forward Air's Analysis

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

WACC Analysis Information

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

2. The WACC calculation uses the higher of Forward Air'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 Forward Air uses a significant proportion of equity capital.