Prudential Public - WACC Analysis

Prudential Public (Weighted Average Cost of Capital (WACC) Analysis)

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Helpful Information for Prudential Public's Analysis

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

WACC Analysis Information

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

2. The WACC calculation uses the higher of Prudential Public'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 Prudential Public uses a significant proportion of equity capital.