Alexandria Real Estate - WACC Analysis

Alexandria Real Estate (Weighted Average Cost of Capital (WACC) Analysis)

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Helpful Information for Alexandria Real Estate's Analysis

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

WACC Analysis Information

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

2. The WACC calculation uses the higher of Alexandria Real Estate'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 Alexandria Real Estate uses a significant proportion of equity capital.