Bank of the Ozarks - WACC Analysis

Bank of the Ozarks (Weighted Average Cost of Capital (WACC) Analysis)



Helpful Information for Bank of the Ozarks's Analysis

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

WACC Analysis Information

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

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