Ameristar Casinos - WACC Analysis

Ameristar Casinos (Weighted Average Cost of Capital (WACC) Analysis)



Helpful Information for Ameristar Casinos's Analysis

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

WACC Analysis Information

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

2. The WACC calculation uses the higher of Ameristar Casinos'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 Ameristar Casinos uses a significant proportion of equity capital.