Fly Leasing - WACC Analysis

Fly Leasing (Weighted Average Cost of Capital (WACC) Analysis)

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Helpful Information for Fly Leasing's Analysis

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

WACC Analysis Information

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

2. The WACC calculation uses the higher of Fly Leasing'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 Fly Leasing uses a significant proportion of equity capital.