AFC Enterprises (Weighted Average Cost of Capital (WACC) Analysis)
Helpful Information for AFC Enterprises's Analysis
What is the WACC Formula? Analyst use the WACC Discount Rate (weighted average cost of capital) to determine AFC Enterprises'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 AFC Enterprises. Value Investing Importance? This method is widely used by investment professionals to determine the correct price for investments in AFC Enterprises before they make value investing decisions. This WACC analysis is used in AFC Enterprises's discounted cash flow (DCF) valuation and see how the WACC calculation affect's AFC Enterprises's company valuation.
WACC Analysis Information
1. The WACC (discount rate) calculation for AFC Enterprises uses comparable companies to produce a single WACC (discount rate). An industry average WACC (discount rate) is the most accurate for AFC Enterprises over the long term. If there are any short-term differences between the industry WACC and AFC Enterprises's WACC (discount rate), then AFC Enterprises is more likely to revert to the industry WACC (discount rate) over the long term.
2. The WACC calculation uses the higher of AFC Enterprises'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 AFC Enterprises uses a significant proportion of equity capital.