Hershey - WACC Analysis

Hershey (Weighted Average Cost of Capital (WACC) Analysis)



Helpful Information for Hershey's Analysis

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

WACC Analysis Information

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

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