M&T Bank (Weighted Average Cost of Capital (WACC) Analysis)
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Helpful Information for M&T Bank's Analysis
What is the WACC Formula? Analyst use the WACC Discount Rate (weighted average cost of capital) to determine M&T Bank'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 M&T Bank. Value Investing Importance? This method is widely used by investment professionals to determine the correct price for investments in M&T Bank before they make value investing decisions. This WACC analysis is used in M&T Bank's discounted cash flow (DCF) valuation and see how the WACC calculation affect's M&T Bank's company valuation.
WACC Analysis Information
1. The WACC (discount rate) calculation for M&T Bank uses comparable companies to produce a single WACC (discount rate). An industry average WACC (discount rate) is the most accurate for M&T Bank over the long term. If there are any short-term differences between the industry WACC and M&T Bank's WACC (discount rate), then M&T Bank is more likely to revert to the industry WACC (discount rate) over the long term.
2. The WACC calculation uses the higher of M&T Bank'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 M&T Bank uses a significant proportion of equity capital.