Safe Bulkers - WACC Analysis

Safe Bulkers (Weighted Average Cost of Capital (WACC) Analysis)



Helpful Information for Safe Bulkers's Analysis

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

WACC Analysis Information

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

2. The WACC calculation uses the higher of Safe Bulkers'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 Safe Bulkers uses a significant proportion of equity capital.