McGraw-Hill - WACC Analysis

McGraw-Hill (Weighted Average Cost of Capital (WACC) Analysis)

placeholder_large_analysis.png

Banner%20-%20The%20perfect%20tool%20for%20investors%281%29.gif

Helpful Information for McGraw-Hill's Analysis

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

WACC Analysis Information

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

2. The WACC calculation uses the higher of McGraw-Hill'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 McGraw-Hill uses a significant proportion of equity capital.