Patriot Transportation - WACC Analysis

Patriot Transportation (Weighted Average Cost of Capital (WACC) Analysis)



Helpful Information for Patriot Transportation's Analysis

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

WACC Analysis Information

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

2. The WACC calculation uses the higher of Patriot Transportation'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 Patriot Transportation uses a significant proportion of equity capital.