Health Care REIT - WACC Analysis

Health Care REIT (Weighted Average Cost of Capital (WACC) Analysis)



Helpful Information for Health Care REIT's Analysis

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

WACC Analysis Information

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

2. The WACC calculation uses the higher of Health Care REIT'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 Health Care REIT uses a significant proportion of equity capital.