Cooper Industries - WACC Analysis

Cooper Industries (Weighted Average Cost of Capital (WACC) Analysis)



Helpful Information for Cooper Industries's Analysis

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

WACC Analysis Information

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

2. The WACC calculation uses the higher of Cooper Industries'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 Cooper Industries uses a significant proportion of equity capital.