Office Depot - WACC Analysis

Office Depot (Weighted Average Cost of Capital (WACC) Analysis)



Helpful Information for Office Depot's Analysis

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

WACC Analysis Information

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

2. The WACC calculation uses the higher of Office Depot'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 Office Depot uses a significant proportion of equity capital.