Landstar System - WACC Analysis

Landstar System (Weighted Average Cost of Capital (WACC) Analysis)



Helpful Information for Landstar System's Analysis

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

WACC Analysis Information

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

2. The WACC calculation uses the higher of Landstar System'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 Landstar System uses a significant proportion of equity capital.