Buffalo Wild Wings - WACC Analysis

Buffalo Wild Wings (Weighted Average Cost of Capital (WACC) Analysis)



Helpful Information for Buffalo Wild Wings's Analysis

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

WACC Analysis Information

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

2. The WACC calculation uses the higher of Buffalo Wild Wings'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 Buffalo Wild Wings uses a significant proportion of equity capital.