Rowan Cos - WACC Analysis

Rowan Cos (Weighted Average Cost of Capital (WACC) Analysis)



Helpful Information for Rowan Cos's Analysis

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

WACC Analysis Information

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

2. The WACC calculation uses the higher of Rowan Cos'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 Rowan Cos uses a significant proportion of equity capital.