Lions Gate Ent - WACC Analysis

Lions Gate Ent (Weighted Average Cost of Capital (WACC) Analysis)



Helpful Information for Lions Gate Ent's Analysis

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

WACC Analysis Information

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

2. The WACC calculation uses the higher of Lions Gate Ent'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 Lions Gate Ent uses a significant proportion of equity capital.