Coldwater Creek - WACC Analysis

Coldwater Creek (Weighted Average Cost of Capital (WACC) Analysis)



Helpful Information for Coldwater Creek's Analysis

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

WACC Analysis Information

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

2. The WACC calculation uses the higher of Coldwater Creek'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 Coldwater Creek uses a significant proportion of equity capital.