Banco Itau Holding Financeira - WACC Analysis

Banco Itau Holding Financeira (Weighted Average Cost of Capital (WACC) Analysis)



Helpful Information for Banco Itau Holding Financeira's Analysis

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

WACC Analysis Information

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

2. The WACC calculation uses the higher of Banco Itau Holding Financeira'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 Banco Itau Holding Financeira uses a significant proportion of equity capital.