Retail Ventures - WACC Analysis

Retail Ventures (Weighted Average Cost of Capital (WACC) Analysis)



Helpful Information for Retail Ventures's Analysis

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

WACC Analysis Information

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

2. The WACC calculation uses the higher of Retail Ventures'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 Retail Ventures uses a significant proportion of equity capital.