Star Bulk Carriers - WACC Analysis

Star Bulk Carriers (Weighted Average Cost of Capital (WACC) Analysis)



Helpful Information for Star Bulk Carriers's Analysis

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

WACC Analysis Information

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

2. The WACC calculation uses the higher of Star Bulk Carriers'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 Star Bulk Carriers uses a significant proportion of equity capital.