School Specialty (Weighted Average Cost of Capital (WACC) Analysis)
Helpful Information for School Specialty's Analysis
What is the WACC Formula? Analyst use the WACC Discount Rate (weighted average cost of capital) to determine School Specialty'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 School Specialty. Value Investing Importance? This method is widely used by investment professionals to determine the correct price for investments in School Specialty before they make value investing decisions. This WACC analysis is used in School Specialty's discounted cash flow (DCF) valuation and see how the WACC calculation affect's School Specialty's company valuation.
WACC Analysis Information
1. The WACC (discount rate) calculation for School Specialty uses comparable companies to produce a single WACC (discount rate). An industry average WACC (discount rate) is the most accurate for School Specialty over the long term. If there are any short-term differences between the industry WACC and School Specialty's WACC (discount rate), then School Specialty is more likely to revert to the industry WACC (discount rate) over the long term.
2. The WACC calculation uses the higher of School Specialty'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 School Specialty uses a significant proportion of equity capital.