Huron Consulting (Weighted Average Cost of Capital (WACC) Analysis)
Helpful Information for Huron Consulting's Analysis
What is the WACC Formula? Analyst use the WACC Discount Rate (weighted average cost of capital) to determine Huron Consulting'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 Huron Consulting. Value Investing Importance? This method is widely used by investment professionals to determine the correct price for investments in Huron Consulting before they make value investing decisions. This WACC analysis is used in Huron Consulting's discounted cash flow (DCF) valuation and see how the WACC calculation affect's Huron Consulting's company valuation.
WACC Analysis Information
1. The WACC (discount rate) calculation for Huron Consulting uses comparable companies to produce a single WACC (discount rate). An industry average WACC (discount rate) is the most accurate for Huron Consulting over the long term. If there are any short-term differences between the industry WACC and Huron Consulting's WACC (discount rate), then Huron Consulting is more likely to revert to the industry WACC (discount rate) over the long term.
2. The WACC calculation uses the higher of Huron Consulting'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 Huron Consulting uses a significant proportion of equity capital.