National City - WACC Analysis

National City (Weighted Average Cost of Capital (WACC) Analysis)



Helpful Information for National City's Analysis

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

WACC Analysis Information

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

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