Gerdau AmeriSteel - WACC Analysis

Gerdau AmeriSteel (Weighted Average Cost of Capital (WACC) Analysis)

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Helpful Information for Gerdau AmeriSteel's Analysis

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

WACC Analysis Information

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

2. The WACC calculation uses the higher of Gerdau AmeriSteel'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 Gerdau AmeriSteel uses a significant proportion of equity capital.