Beneficial Mutual - WACC Analysis

Beneficial Mutual (Weighted Average Cost of Capital (WACC) Analysis)

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Helpful Information for Beneficial Mutual's Analysis

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

WACC Analysis Information

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

2. The WACC calculation uses the higher of Beneficial Mutual'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 Beneficial Mutual uses a significant proportion of equity capital.