Community Health Sys - WACC Analysis

Community Health Sys (Weighted Average Cost of Capital (WACC) Analysis)



Helpful Information for Community Health Sys's Analysis

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

WACC Analysis Information

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

2. The WACC calculation uses the higher of Community Health Sys'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 Community Health Sys uses a significant proportion of equity capital.