Bryn Mawr Bank (Weighted Average Cost of Capital (WACC) Analysis)
Helpful Information for Bryn Mawr Bank's Analysis
What is the WACC Formula? Analyst use the WACC Discount Rate (weighted average cost of capital) to determine Bryn Mawr Bank'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 Bryn Mawr Bank. Value Investing Importance? This method is widely used by investment professionals to determine the correct price for investments in Bryn Mawr Bank before they make value investing decisions. This WACC analysis is used in Bryn Mawr Bank's discounted cash flow (DCF) valuation and see how the WACC calculation affect's Bryn Mawr Bank's company valuation.
WACC Analysis Information
1. The WACC (discount rate) calculation for Bryn Mawr Bank uses comparable companies to produce a single WACC (discount rate). An industry average WACC (discount rate) is the most accurate for Bryn Mawr Bank over the long term. If there are any short-term differences between the industry WACC and Bryn Mawr Bank's WACC (discount rate), then Bryn Mawr Bank is more likely to revert to the industry WACC (discount rate) over the long term.
2. The WACC calculation uses the higher of Bryn Mawr Bank'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 Bryn Mawr Bank uses a significant proportion of equity capital.