Penn National Gaming - WACC Analysis

Penn National Gaming (Weighted Average Cost of Capital (WACC) Analysis)



Helpful Information for Penn National Gaming's Analysis

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

WACC Analysis Information

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

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