Home Inns & Hotels - WACC Analysis

Home Inns & Hotels (Weighted Average Cost of Capital (WACC) Analysis)



Helpful Information for Home Inns & Hotels's Analysis

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

WACC Analysis Information

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

2. The WACC calculation uses the higher of Home Inns & Hotels'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 Home Inns & Hotels uses a significant proportion of equity capital.