Layne Christensen - WACC Analysis

Layne Christensen (Weighted Average Cost of Capital (WACC) Analysis)



Helpful Information for Layne Christensen's Analysis

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

WACC Analysis Information

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

2. The WACC calculation uses the higher of Layne Christensen'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 Layne Christensen uses a significant proportion of equity capital.