Martin Marietta Materials - WACC Analysis

Martin Marietta Materials (Weighted Average Cost of Capital (WACC) Analysis)



Helpful Information for Martin Marietta Materials's Analysis

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

WACC Analysis Information

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

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