Greif Bros (Weighted Average Cost of Capital (WACC) Analysis)
Helpful Information for Greif Bros's Analysis
What is the WACC Formula? Analyst use the WACC Discount Rate (weighted average cost of capital) to determine Greif Bros'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 Greif Bros. Value Investing Importance? This method is widely used by investment professionals to determine the correct price for investments in Greif Bros before they make value investing decisions. This WACC analysis is used in Greif Bros's discounted cash flow (DCF) valuation and see how the WACC calculation affect's Greif Bros's company valuation.
WACC Analysis Information
1. The WACC (discount rate) calculation for Greif Bros uses comparable companies to produce a single WACC (discount rate). An industry average WACC (discount rate) is the most accurate for Greif Bros over the long term. If there are any short-term differences between the industry WACC and Greif Bros's WACC (discount rate), then Greif Bros is more likely to revert to the industry WACC (discount rate) over the long term.
2. The WACC calculation uses the higher of Greif Bros'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 Greif Bros uses a significant proportion of equity capital.