TriCo Bancshares - WACC Analysis

TriCo Bancshares (Weighted Average Cost of Capital (WACC) Analysis)



Helpful Information for TriCo Bancshares's Analysis

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

WACC Analysis Information

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

2. The WACC calculation uses the higher of TriCo Bancshares'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 TriCo Bancshares uses a significant proportion of equity capital.