Arch Chemicals - WACC Analysis

Arch Chemicals (Weighted Average Cost of Capital (WACC) Analysis)



Helpful Information for Arch Chemicals's Analysis

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

WACC Analysis Information

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

2. The WACC calculation uses the higher of Arch Chemicals'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 Arch Chemicals uses a significant proportion of equity capital.