Simon Property - WACC Analysis

Simon Property (Weighted Average Cost of Capital (WACC) Analysis)



Helpful Information for Simon Property's Analysis

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

WACC Analysis Information

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

2. The WACC calculation uses the higher of Simon Property'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 Simon Property uses a significant proportion of equity capital.