Paragon Shipping - WACC Analysis

Paragon Shipping (Weighted Average Cost of Capital (WACC) Analysis)



Helpful Information for Paragon Shipping's Analysis

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

WACC Analysis Information

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

2. The WACC calculation uses the higher of Paragon Shipping'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 Paragon Shipping uses a significant proportion of equity capital.