FTI Consulting - WACC Analysis

FTI Consulting (Weighted Average Cost of Capital (WACC) Analysis)



Helpful Information for FTI Consulting's Analysis

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

WACC Analysis Information

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

2. The WACC calculation uses the higher of FTI Consulting'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 FTI Consulting uses a significant proportion of equity capital.