Newell Rubbermaid - WACC Analysis

Newell Rubbermaid (Weighted Average Cost of Capital (WACC) Analysis)



Helpful Information for Newell Rubbermaid's Analysis

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

WACC Analysis Information

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

2. The WACC calculation uses the higher of Newell Rubbermaid'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 Newell Rubbermaid uses a significant proportion of equity capital.