Monmouth REIT - WACC Analysis

Monmouth REIT (Weighted Average Cost of Capital (WACC) Analysis)



Helpful Information for Monmouth REIT's Analysis

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

WACC Analysis Information

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

2. The WACC calculation uses the higher of Monmouth REIT'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 Monmouth REIT uses a significant proportion of equity capital.