Crane Company - WACC Analysis

Crane Company (Weighted Average Cost of Capital (WACC) Analysis)



Helpful Information for Crane Company's Analysis

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

WACC Analysis Information

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

2. The WACC calculation uses the higher of Crane Company'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 Crane Company uses a significant proportion of equity capital.