Timberland Company - WACC Analysis

Timberland Company (Weighted Average Cost of Capital (WACC) Analysis)



Helpful Information for Timberland Company's Analysis

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

WACC Analysis Information

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

2. The WACC calculation uses the higher of Timberland Company'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 Timberland Company uses a significant proportion of equity capital.