Home Federal Banc - WACC Analysis

Home Federal Banc (Weighted Average Cost of Capital (WACC) Analysis)



Helpful Information for Home Federal Banc's Analysis

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

WACC Analysis Information

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

2. The WACC calculation uses the higher of Home Federal 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 Home Federal Banc uses a significant proportion of equity capital.