Sandy Spring - WACC Analysis

Sandy Spring (Weighted Average Cost of Capital (WACC) Analysis)



Helpful Information for Sandy Spring's Analysis

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

WACC Analysis Information

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

2. The WACC calculation uses the higher of Sandy Spring'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 Sandy Spring uses a significant proportion of equity capital.