Annaly Capital - WACC Analysis

Annaly Capital (Weighted Average Cost of Capital (WACC) Analysis)



Helpful Information for Annaly Capital's Analysis

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

WACC Analysis Information

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

2. The WACC calculation uses the higher of Annaly Capital'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 Annaly Capital uses a significant proportion of equity capital.