Old National Bancorp - WACC Analysis

Old National Bancorp (Weighted Average Cost of Capital (WACC) Analysis)



Helpful Information for Old National Bancorp's Analysis

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

WACC Analysis Information

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

2. The WACC calculation uses the higher of Old National Bancorp'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 National Bancorp uses a significant proportion of equity capital.