Seneca Foods - WACC Analysis

Seneca Foods (Weighted Average Cost of Capital (WACC) Analysis)



Helpful Information for Seneca Foods's Analysis

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

WACC Analysis Information

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

2. The WACC calculation uses the higher of Seneca Foods'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 Seneca Foods uses a significant proportion of equity capital.