Walter Industries - WACC Analysis

Walter Industries (Weighted Average Cost of Capital (WACC) Analysis)



Helpful Information for Walter Industries's Analysis

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

WACC Analysis Information

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

2. The WACC calculation uses the higher of Walter Industries'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 Walter Industries uses a significant proportion of equity capital.