Alterra Capital Holdings - WACC Analysis

Alterra Capital Holdings (Weighted Average Cost of Capital (WACC) Analysis)



Helpful Information for Alterra Capital Holdings's Analysis

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

WACC Analysis Information

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

2. The WACC calculation uses the higher of Alterra Capital Holdings'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 Alterra Capital Holdings uses a significant proportion of equity capital.