Iberia Bank - WACC Analysis

Iberia Bank (Weighted Average Cost of Capital (WACC) Analysis)



Helpful Information for Iberia Bank's Analysis

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

WACC Analysis Information

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

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