Peet's Coffee & Tea - WACC Analysis

Peet's Coffee & Tea (Weighted Average Cost of Capital (WACC) Analysis)



Helpful Information for Peet's Coffee & Tea's Analysis

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

WACC Analysis Information

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

2. The WACC calculation uses the higher of Peet's Coffee & Tea'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 Peet's Coffee & Tea uses a significant proportion of equity capital.