EMC Insurance - WACC Analysis

EMC Insurance (Weighted Average Cost of Capital (WACC) Analysis)



Helpful Information for EMC Insurance's Analysis

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

WACC Analysis Information

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

2. The WACC calculation uses the higher of EMC Insurance'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 EMC Insurance uses a significant proportion of equity capital.