Gevity HR - WACC Analysis

Gevity HR (Weighted Average Cost of Capital (WACC) Analysis)

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Helpful Information for Gevity HR's Analysis

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

WACC Analysis Information

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

2. The WACC calculation uses the higher of Gevity HR'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 Gevity HR uses a significant proportion of equity capital.