Preformed Line Products - WACC Analysis

Preformed Line Products (Weighted Average Cost of Capital (WACC) Analysis)



Helpful Information for Preformed Line Products's Analysis

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

WACC Analysis Information

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

2. The WACC calculation uses the higher of Preformed Line Products'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 Preformed Line Products uses a significant proportion of equity capital.