Arkansas Best - WACC Analysis

Arkansas Best (Weighted Average Cost of Capital (WACC) Analysis)



Helpful Information for Arkansas Best's Analysis

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

WACC Analysis Information

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

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