Core-Mark (Weighted Average Cost of Capital (WACC) Analysis)
Helpful Information for Core-Mark's Analysis
What is the WACC Formula? Analyst use the WACC Discount Rate (weighted average cost of capital) to determine Core-Mark'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 Core-Mark. Value Investing Importance? This method is widely used by investment professionals to determine the correct price for investments in Core-Mark before they make value investing decisions. This WACC analysis is used in Core-Mark's discounted cash flow (DCF) valuation and see how the WACC calculation affect's Core-Mark's company valuation.
WACC Analysis Information
1. The WACC (discount rate) calculation for Core-Mark uses comparable companies to produce a single WACC (discount rate). An industry average WACC (discount rate) is the most accurate for Core-Mark over the long term. If there are any short-term differences between the industry WACC and Core-Mark's WACC (discount rate), then Core-Mark is more likely to revert to the industry WACC (discount rate) over the long term.
2. The WACC calculation uses the higher of Core-Mark'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 Core-Mark uses a significant proportion of equity capital.