Men's Wearhouse (Weighted Average Cost of Capital (WACC) Analysis)
Helpful Information for Men's Wearhouse's Analysis
What is the WACC Formula? Analyst use the WACC Discount Rate (weighted average cost of capital) to determine Men's Wearhouse'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 Men's Wearhouse. Value Investing Importance? This method is widely used by investment professionals to determine the correct price for investments in Men's Wearhouse before they make value investing decisions. This WACC analysis is used in Men's Wearhouse's discounted cash flow (DCF) valuation and see how the WACC calculation affect's Men's Wearhouse's company valuation.
WACC Analysis Information
1. The WACC (discount rate) calculation for Men's Wearhouse uses comparable companies to produce a single WACC (discount rate). An industry average WACC (discount rate) is the most accurate for Men's Wearhouse over the long term. If there are any short-term differences between the industry WACC and Men's Wearhouse's WACC (discount rate), then Men's Wearhouse is more likely to revert to the industry WACC (discount rate) over the long term.
2. The WACC calculation uses the higher of Men's Wearhouse'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 Men's Wearhouse uses a significant proportion of equity capital.