CEC Entertainment - WACC Analysis

CEC Entertainment (Weighted Average Cost of Capital (WACC) Analysis)



Helpful Information for CEC Entertainment's Analysis

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

WACC Analysis Information

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

2. The WACC calculation uses the higher of CEC Entertainment'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 CEC Entertainment uses a significant proportion of equity capital.