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