CNA Financial - WACC Analysis

CNA Financial (Weighted Average Cost of Capital (WACC) Analysis)



Helpful Information for CNA Financial's Analysis

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

WACC Analysis Information

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

2. The WACC calculation uses the higher of CNA 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 CNA Financial uses a significant proportion of equity capital.