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