Rockville Financial - WACC Analysis

Rockville Financial (Weighted Average Cost of Capital (WACC) Analysis)



Helpful Information for Rockville Financial's Analysis

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

WACC Analysis Information

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

2. The WACC calculation uses the higher of Rockville Financial'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 Rockville Financial uses a significant proportion of equity capital.