Highwoods Properties - WACC Analysis

Highwoods Properties (Weighted Average Cost of Capital (WACC) Analysis)



Helpful Information for Highwoods Properties's Analysis

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

WACC Analysis Information

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

2. The WACC calculation uses the higher of Highwoods Properties'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 Highwoods Properties uses a significant proportion of equity capital.