Douglas Emmett - WACC Analysis

Douglas Emmett (Weighted Average Cost of Capital (WACC) Analysis)

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Helpful Information for Douglas Emmett's Analysis

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

WACC Analysis Information

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

2. The WACC calculation uses the higher of Douglas Emmett'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 Douglas Emmett uses a significant proportion of equity capital.