Westwood Holdings - WACC Analysis

Westwood Holdings (Weighted Average Cost of Capital (WACC) Analysis)



Helpful Information for Westwood Holdings's Analysis

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

WACC Analysis Information

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

2. The WACC calculation uses the higher of Westwood Holdings'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 Westwood Holdings uses a significant proportion of equity capital.