Lockheed Martin - WACC Analysis

Lockheed Martin (Weighted Average Cost of Capital (WACC) Analysis)



Helpful Information for Lockheed Martin's Analysis

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

WACC Analysis Information

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

2. The WACC calculation uses the higher of Lockheed Martin'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 Lockheed Martin uses a significant proportion of equity capital.