Steinway Musical - WACC Analysis

Steinway Musical (Weighted Average Cost of Capital (WACC) Analysis)



Helpful Information for Steinway Musical's Analysis

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

WACC Analysis Information

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

2. The WACC calculation uses the higher of Steinway Musical'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 Steinway Musical uses a significant proportion of equity capital.