Frozen Food Express - WACC Analysis

Frozen Food Express (Weighted Average Cost of Capital (WACC) Analysis)



Helpful Information for Frozen Food Express's Analysis

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

WACC Analysis Information

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

2. The WACC calculation uses the higher of Frozen Food Express'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 Frozen Food Express uses a significant proportion of equity capital.