Corinthian Colleges - WACC Analysis

Corinthian Colleges (Weighted Average Cost of Capital (WACC) Analysis)



Helpful Information for Corinthian Colleges's Analysis

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

WACC Analysis Information

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

2. The WACC calculation uses the higher of Corinthian Colleges'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 Corinthian Colleges uses a significant proportion of equity capital.