Polo Ralph Lauren - WACC Analysis

Polo Ralph Lauren (Weighted Average Cost of Capital (WACC) Analysis)

placeholder_large_analysis.png

Banner%20-%20The%20perfect%20tool%20for%20investors%281%29.gif

Helpful Information for Polo Ralph Lauren's Analysis

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

WACC Analysis Information

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

2. The WACC calculation uses the higher of Polo Ralph Lauren'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 Polo Ralph Lauren uses a significant proportion of equity capital.