Berkshire Hills Bancorp - WACC Analysis

Berkshire Hills Bancorp (Weighted Average Cost of Capital (WACC) Analysis)



Helpful Information for Berkshire Hills Bancorp's Analysis

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

WACC Analysis Information

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

2. The WACC calculation uses the higher of Berkshire Hills Bancorp'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 Berkshire Hills Bancorp uses a significant proportion of equity capital.