Gulf Island Fabrication - WACC Analysis

Gulf Island Fabrication (Weighted Average Cost of Capital (WACC) Analysis)



Helpful Information for Gulf Island Fabrication's Analysis

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

WACC Analysis Information

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

2. The WACC calculation uses the higher of Gulf Island Fabrication'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 Gulf Island Fabrication uses a significant proportion of equity capital.