City National - WACC Analysis

City National (Weighted Average Cost of Capital (WACC) Analysis)



Helpful Information for City National's Analysis

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

WACC Analysis Information

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

2. The WACC calculation uses the higher of City National'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 City National uses a significant proportion of equity capital.