Developers Diversified Rlty - WACC Analysis

Developers Diversified Rlty (Weighted Average Cost of Capital (WACC) Analysis)



Helpful Information for Developers Diversified Rlty's Analysis

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

WACC Analysis Information

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

2. The WACC calculation uses the higher of Developers Diversified Rlty'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 Developers Diversified Rlty uses a significant proportion of equity capital.