Jacobs Engineering - WACC Analysis

Jacobs Engineering (Weighted Average Cost of Capital (WACC) Analysis)



Helpful Information for Jacobs Engineering's Analysis

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

WACC Analysis Information

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

2. The WACC calculation uses the higher of Jacobs Engineering'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 Jacobs Engineering uses a significant proportion of equity capital.