Brookdale Senior Living - WACC Analysis

Brookdale Senior Living (Weighted Average Cost of Capital (WACC) Analysis)



Helpful Information for Brookdale Senior Living's Analysis

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

WACC Analysis Information

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

2. The WACC calculation uses the higher of Brookdale Senior Living'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 Brookdale Senior Living uses a significant proportion of equity capital.