Jo-Ann Stores - WACC Analysis

Jo-Ann Stores (Weighted Average Cost of Capital (WACC) Analysis)



Helpful Information for Jo-Ann Stores's Analysis

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

WACC Analysis Information

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

2. The WACC calculation uses the higher of Jo-Ann Stores'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 Jo-Ann Stores uses a significant proportion of equity capital.