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