Callaway Golf - WACC Analysis

Callaway Golf (Weighted Average Cost of Capital (WACC) Analysis)



Helpful Information for Callaway Golf's Analysis

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

WACC Analysis Information

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

2. The WACC calculation uses the higher of Callaway Golf'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 Callaway Golf uses a significant proportion of equity capital.