Walt Disney - WACC Analysis

Walt Disney (Weighted Average Cost of Capital (WACC) Analysis)

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Helpful Information for Walt Disney's Analysis

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

WACC Analysis Information

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

2. The WACC calculation uses the higher of Walt Disney'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 Walt Disney uses a significant proportion of equity capital.