National Western Life Ins - WACC Analysis

National Western Life Ins (Weighted Average Cost of Capital (WACC) Analysis)

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Helpful Information for National Western Life Ins's Analysis

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

WACC Analysis Information

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

2. The WACC calculation uses the higher of National Western Life Ins'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 National Western Life Ins uses a significant proportion of equity capital.