Cape Bancorp - WACC Analysis

Cape Bancorp (Weighted Average Cost of Capital (WACC) Analysis)



Helpful Information for Cape Bancorp's Analysis

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

WACC Analysis Information

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

2. The WACC calculation uses the higher of Cape Bancorp'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 Cape Bancorp uses a significant proportion of equity capital.