Carbo Ceramics - WACC Analysis

Carbo Ceramics (Weighted Average Cost of Capital (WACC) Analysis)

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Helpful Information for Carbo Ceramics's Analysis

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

WACC Analysis Information

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

2. The WACC calculation uses the higher of Carbo Ceramics'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 Carbo Ceramics uses a significant proportion of equity capital.