Bank of Hawaii - WACC Analysis

Bank of Hawaii (Weighted Average Cost of Capital (WACC) Analysis)

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Helpful Information for Bank of Hawaii's Analysis

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

WACC Analysis Information

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

2. The WACC calculation uses the higher of Bank of Hawaii'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 Bank of Hawaii uses a significant proportion of equity capital.