Elizabeth Arden - WACC Analysis

Elizabeth Arden (Weighted Average Cost of Capital (WACC) Analysis)



Helpful Information for Elizabeth Arden's Analysis

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

WACC Analysis Information

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

2. The WACC calculation uses the higher of Elizabeth Arden'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 Elizabeth Arden uses a significant proportion of equity capital.