Farmers Capital Bank - WACC Analysis

Farmers Capital Bank (Weighted Average Cost of Capital (WACC) Analysis)



Helpful Information for Farmers Capital Bank's Analysis

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

WACC Analysis Information

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

2. The WACC calculation uses the higher of Farmers Capital Bank'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 Farmers Capital Bank uses a significant proportion of equity capital.