Shinhan Financial - WACC Analysis

Shinhan Financial (Weighted Average Cost of Capital (WACC) Analysis)



Helpful Information for Shinhan Financial's Analysis

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

WACC Analysis Information

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

2. The WACC calculation uses the higher of Shinhan Financial'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 Shinhan Financial uses a significant proportion of equity capital.