Capital City Bank - WACC Analysis

Capital City Bank (Weighted Average Cost of Capital (WACC) Analysis)

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Helpful Information for Capital City Bank's Analysis

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

WACC Analysis Information

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

2. The WACC calculation uses the higher of Capital City Bank'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 Capital City Bank uses a significant proportion of equity capital.