Cracker Barrel - WACC Analysis

Cracker Barrel (Weighted Average Cost of Capital (WACC) Analysis)



Helpful Information for Cracker Barrel's Analysis

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

WACC Analysis Information

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

2. The WACC calculation uses the higher of Cracker Barrel'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 Cracker Barrel uses a significant proportion of equity capital.