Ship Finance Intl - WACC Analysis

Ship Finance Intl (Weighted Average Cost of Capital (WACC) Analysis)



Helpful Information for Ship Finance Intl's Analysis

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

WACC Analysis Information

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

2. The WACC calculation uses the higher of Ship Finance Intl'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 Ship Finance Intl uses a significant proportion of equity capital.