Carpenter Tech - WACC Analysis

Carpenter Tech (Weighted Average Cost of Capital (WACC) Analysis)

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Helpful Information for Carpenter Tech's Analysis

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

WACC Analysis Information

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

2. The WACC calculation uses the higher of Carpenter Tech'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 Carpenter Tech uses a significant proportion of equity capital.