Clifton Savings - WACC Analysis

Clifton Savings (Weighted Average Cost of Capital (WACC) Analysis)



Helpful Information for Clifton Savings's Analysis

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

WACC Analysis Information

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

2. The WACC calculation uses the higher of Clifton Savings'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 Clifton Savings uses a significant proportion of equity capital.