AK Steel Holding - WACC Analysis

AK Steel Holding (Weighted Average Cost of Capital (WACC) Analysis)



Helpful Information for AK Steel Holding's Analysis

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

WACC Analysis Information

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

2. The WACC calculation uses the higher of AK Steel Holding'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 AK Steel Holding uses a significant proportion of equity capital.