Churchill Downs - WACC Analysis

Churchill Downs (Weighted Average Cost of Capital (WACC) Analysis)



Helpful Information for Churchill Downs's Analysis

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

WACC Analysis Information

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

2. The WACC calculation uses the higher of Churchill Downs'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 Churchill Downs uses a significant proportion of equity capital.