Essex Property - WACC Analysis

Essex Property (Weighted Average Cost of Capital (WACC) Analysis)

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Helpful Information for Essex Property's Analysis

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

WACC Analysis Information

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

2. The WACC calculation uses the higher of Essex Property'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 Essex Property uses a significant proportion of equity capital.