MSC Industrial Direct - WACC Analysis

MSC Industrial Direct (Weighted Average Cost of Capital (WACC) Analysis)



Helpful Information for MSC Industrial Direct's Analysis

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

WACC Analysis Information

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

2. The WACC calculation uses the higher of MSC Industrial Direct'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 MSC Industrial Direct uses a significant proportion of equity capital.