Northstar Realty Finance - WACC Analysis

Northstar Realty Finance (Weighted Average Cost of Capital (WACC) Analysis)



Helpful Information for Northstar Realty Finance's Analysis

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

WACC Analysis Information

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

2. The WACC calculation uses the higher of Northstar Realty Finance'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 Northstar Realty Finance uses a significant proportion of equity capital.