Capitol Federal Financial - WACC Analysis

Capitol Federal Financial (Weighted Average Cost of Capital (WACC) Analysis)



Helpful Information for Capitol Federal Financial's Analysis

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

WACC Analysis Information

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

2. The WACC calculation uses the higher of Capitol Federal Financial'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 Capitol Federal Financial uses a significant proportion of equity capital.