Joy Global - WACC Analysis

Joy Global (Weighted Average Cost of Capital (WACC) Analysis)



Helpful Information for Joy Global's Analysis

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

WACC Analysis Information

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

2. The WACC calculation uses the higher of Joy Global'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 Joy Global uses a significant proportion of equity capital.