Saks Inc - WACC Analysis

Saks Inc (Weighted Average Cost of Capital (WACC) Analysis)

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Helpful Information for Saks Inc's Analysis

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

WACC Analysis Information

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

2. The WACC calculation uses the higher of Saks Inc'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 Saks Inc uses a significant proportion of equity capital.