Rockwell Automation - WACC Analysis

Rockwell Automation (Weighted Average Cost of Capital (WACC) Analysis)



Helpful Information for Rockwell Automation's Analysis

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

WACC Analysis Information

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

2. The WACC calculation uses the higher of Rockwell Automation'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 Rockwell Automation uses a significant proportion of equity capital.