Lifeway Foods - WACC Analysis

Lifeway Foods (Weighted Average Cost of Capital (WACC) Analysis)



Helpful Information for Lifeway Foods's Analysis

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

WACC Analysis Information

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

2. The WACC calculation uses the higher of Lifeway Foods'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 Lifeway Foods uses a significant proportion of equity capital.