BRE Properties - WACC Analysis

BRE Properties (Weighted Average Cost of Capital (WACC) Analysis)

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Helpful Information for BRE Properties's Analysis

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

WACC Analysis Information

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

2. The WACC calculation uses the higher of BRE Properties'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 BRE Properties uses a significant proportion of equity capital.