Franklin Electric - WACC Analysis

Franklin Electric (Weighted Average Cost of Capital (WACC) Analysis)

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Helpful Information for Franklin Electric's Analysis

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

WACC Analysis Information

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

2. The WACC calculation uses the higher of Franklin Electric'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 Franklin Electric uses a significant proportion of equity capital.