Boston Properties - WACC Analysis

Boston Properties (Weighted Average Cost of Capital (WACC) Analysis)



Helpful Information for Boston Properties's Analysis

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

WACC Analysis Information

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

2. The WACC calculation uses the higher of Boston Properties'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 Boston Properties uses a significant proportion of equity capital.