Presidential Life - WACC Analysis

Presidential Life (Weighted Average Cost of Capital (WACC) Analysis)



Helpful Information for Presidential Life's Analysis

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

WACC Analysis Information

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

2. The WACC calculation uses the higher of Presidential Life'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 Presidential Life uses a significant proportion of equity capital.