Goodyear Tire & Rubber - WACC Analysis

Goodyear Tire & Rubber (Weighted Average Cost of Capital (WACC) Analysis)



Helpful Information for Goodyear Tire & Rubber's Analysis

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

WACC Analysis Information

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

2. The WACC calculation uses the higher of Goodyear Tire & Rubber'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 Goodyear Tire & Rubber uses a significant proportion of equity capital.