Fomento Economico Mexicano - WACC Analysis

Fomento Economico Mexicano (Weighted Average Cost of Capital (WACC) Analysis)

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Helpful Information for Fomento Economico Mexicano's Analysis

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

WACC Analysis Information

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

2. The WACC calculation uses the higher of Fomento Economico Mexicano'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 Fomento Economico Mexicano uses a significant proportion of equity capital.