Capital One Financial - WACC Analysis

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



Helpful Information for Capital One Financial's Analysis

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

WACC Analysis Information

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

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