Equity One (Weighted Average Cost of Capital (WACC) Analysis)
Helpful Information for Equity One's Analysis
What is the WACC Formula? Analyst use the WACC Discount Rate (weighted average cost of capital) to determine Equity One'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 Equity One. Value Investing Importance? This method is widely used by investment professionals to determine the correct price for investments in Equity One before they make value investing decisions. This WACC analysis is used in Equity One's discounted cash flow (DCF) valuation and see how the WACC calculation affect's Equity One's company valuation.
WACC Analysis Information
1. The WACC (discount rate) calculation for Equity One uses comparable companies to produce a single WACC (discount rate). An industry average WACC (discount rate) is the most accurate for Equity One over the long term. If there are any short-term differences between the industry WACC and Equity One's WACC (discount rate), then Equity One is more likely to revert to the industry WACC (discount rate) over the long term.
2. The WACC calculation uses the higher of Equity One'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 Equity One uses a significant proportion of equity capital.