Common Wealth REIT - WACC Analysis

Common Wealth REIT (Weighted Average Cost of Capital (WACC) Analysis)



Helpful Information for Common Wealth REIT's Analysis

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

WACC Analysis Information

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

2. The WACC calculation uses the higher of Common Wealth REIT'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 Common Wealth REIT uses a significant proportion of equity capital.