Federal Home Loan Mtg - WACC Analysis

Federal Home Loan Mtg (Weighted Average Cost of Capital (WACC) Analysis)



Helpful Information for Federal Home Loan Mtg's Analysis

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

WACC Analysis Information

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

2. The WACC calculation uses the higher of Federal Home Loan Mtg'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 Federal Home Loan Mtg uses a significant proportion of equity capital.