Holly Corp - WACC Analysis

Holly Corp (Weighted Average Cost of Capital (WACC) Analysis)

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Helpful Information for Holly Corp's Analysis

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

WACC Analysis Information

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

2. The WACC calculation uses the higher of Holly Corp'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 Holly Corp uses a significant proportion of equity capital.