Acuity Brands - WACC Analysis

Acuity Brands (Weighted Average Cost of Capital (WACC) Analysis)



Helpful Information for Acuity Brands's Analysis

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

WACC Analysis Information

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

2. The WACC calculation uses the higher of Acuity Brands'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 Acuity Brands uses a significant proportion of equity capital.