Isle of Capri Casinos - WACC Analysis

Isle of Capri Casinos (Weighted Average Cost of Capital (WACC) Analysis)



Helpful Information for Isle of Capri Casinos's Analysis

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

WACC Analysis Information

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

2. The WACC calculation uses the higher of Isle of Capri Casinos'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 Isle of Capri Casinos uses a significant proportion of equity capital.