Century Aluminum - WACC Analysis

Century Aluminum (Weighted Average Cost of Capital (WACC) Analysis)



Helpful Information for Century Aluminum's Analysis

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

WACC Analysis Information

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

2. The WACC calculation uses the higher of Century Aluminum'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 Century Aluminum uses a significant proportion of equity capital.