Jos. A. Bank Clothiers - WACC Analysis

Jos. A. Bank Clothiers (Weighted Average Cost of Capital (WACC) Analysis)



Helpful Information for Jos. A. Bank Clothiers's Analysis

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

WACC Analysis Information

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

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