Zenith National Insurance - WACC Analysis

Zenith National Insurance (Weighted Average Cost of Capital (WACC) Analysis)



Helpful Information for Zenith National Insurance's Analysis

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

WACC Analysis Information

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

2. The WACC calculation uses the higher of Zenith National Insurance'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 Zenith National Insurance uses a significant proportion of equity capital.