Champion Industries - WACC Analysis

Champion Industries (Weighted Average Cost of Capital (WACC) Analysis)

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Helpful Information for Champion Industries's Analysis

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

WACC Analysis Information

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

2. The WACC calculation uses the higher of Champion Industries'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 Champion Industries uses a significant proportion of equity capital.