Tomkins PLC - WACC Analysis

Tomkins PLC (Weighted Average Cost of Capital (WACC) Analysis)



Helpful Information for Tomkins PLC's Analysis

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

WACC Analysis Information

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

2. The WACC calculation uses the higher of Tomkins PLC'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 Tomkins PLC uses a significant proportion of equity capital.