International Shipholding - WACC Analysis

International Shipholding (Weighted Average Cost of Capital (WACC) Analysis)

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Helpful Information for International Shipholding's Analysis

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

WACC Analysis Information

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

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