Cedar Shopping Centers - WACC Analysis

Cedar Shopping Centers (Weighted Average Cost of Capital (WACC) Analysis)

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Helpful Information for Cedar Shopping Centers's Analysis

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

WACC Analysis Information

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

2. The WACC calculation uses the higher of Cedar Shopping Centers'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 Cedar Shopping Centers uses a significant proportion of equity capital.