Old Dominion Freight Line - WACC Analysis

Old Dominion Freight Line (Weighted Average Cost of Capital (WACC) Analysis)



Helpful Information for Old Dominion Freight Line's Analysis

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

WACC Analysis Information

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

2. The WACC calculation uses the higher of Old Dominion Freight Line'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 Old Dominion Freight Line uses a significant proportion of equity capital.