Good Times Restaurants - WACC Analysis

Good Times Restaurants (Weighted Average Cost of Capital (WACC) Analysis)



Helpful Information for Good Times Restaurants's Analysis

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

WACC Analysis Information

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

2. The WACC calculation uses the higher of Good Times Restaurants'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 Good Times Restaurants uses a significant proportion of equity capital.