Royal Bank Of Canada - WACC Analysis

Royal Bank Of Canada (Weighted Average Cost of Capital (WACC) Analysis)



Helpful Information for Royal Bank Of Canada's Analysis

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

WACC Analysis Information

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

2. The WACC calculation uses the higher of Royal Bank Of Canada'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 Royal Bank Of Canada uses a significant proportion of equity capital.