Cornell Corrections - WACC Analysis

Cornell Corrections (Weighted Average Cost of Capital (WACC) Analysis)

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Helpful Information for Cornell Corrections's Analysis

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

WACC Analysis Information

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

2. The WACC calculation uses the higher of Cornell Corrections'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 Cornell Corrections uses a significant proportion of equity capital.