Flow International - WACC Analysis

Flow International (Weighted Average Cost of Capital (WACC) Analysis)

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Helpful Information for Flow International's Analysis

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

WACC Analysis Information

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

2. The WACC calculation uses the higher of Flow International'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 Flow International uses a significant proportion of equity capital.