Harris - WACC Analysis

Harris (Weighted Average Cost of Capital (WACC) Analysis)



Helpful Information for Harris's Analysis

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

WACC Analysis Information

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

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