Career Education (Weighted Average Cost of Capital (WACC) Analysis)
Helpful Information for Career Education's Analysis
What is the WACC Formula? Analyst use the WACC Discount Rate (weighted average cost of capital) to determine Career Education'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 Career Education. Value Investing Importance? This method is widely used by investment professionals to determine the correct price for investments in Career Education before they make value investing decisions. This WACC analysis is used in Career Education's discounted cash flow (DCF) valuation and see how the WACC calculation affect's Career Education's company valuation.
WACC Analysis Information
1. The WACC (discount rate) calculation for Career Education uses comparable companies to produce a single WACC (discount rate). An industry average WACC (discount rate) is the most accurate for Career Education over the long term. If there are any short-term differences between the industry WACC and Career Education's WACC (discount rate), then Career Education is more likely to revert to the industry WACC (discount rate) over the long term.
2. The WACC calculation uses the higher of Career Education'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 Career Education uses a significant proportion of equity capital.