Jack In The Box - WACC Analysis

Jack In The Box (Weighted Average Cost of Capital (WACC) Analysis)



Helpful Information for Jack In The Box's Analysis

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

WACC Analysis Information

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

2. The WACC calculation uses the higher of Jack In The Box'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 Jack In The Box uses a significant proportion of equity capital.