AAON - WACC Analysis

AAON (Weighted Average Cost of Capital (WACC) Analysis)

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Helpful Information for AAON's Analysis

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

WACC Analysis Information

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

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