Martha Stewart Living - WACC Analysis

Martha Stewart Living (Weighted Average Cost of Capital (WACC) Analysis)



Helpful Information for Martha Stewart Living's Analysis

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

WACC Analysis Information

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

2. The WACC calculation uses the higher of Martha Stewart Living'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 Martha Stewart Living uses a significant proportion of equity capital.