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