Extra Space Storage - WACC Analysis

Extra Space Storage (Weighted Average Cost of Capital (WACC) Analysis)



Helpful Information for Extra Space Storage's Analysis

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

WACC Analysis Information

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

2. The WACC calculation uses the higher of Extra Space Storage'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 Extra Space Storage uses a significant proportion of equity capital.