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