Eaton Vance - WACC Analysis

Eaton Vance (Weighted Average Cost of Capital (WACC) Analysis)



Helpful Information for Eaton Vance's Analysis

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

WACC Analysis Information

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

2. The WACC calculation uses the higher of Eaton Vance'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 Eaton Vance uses a significant proportion of equity capital.