SL Green Realty - WACC Analysis

SL Green Realty (Weighted Average Cost of Capital (WACC) Analysis)



Helpful Information for SL Green Realty's Analysis

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

WACC Analysis Information

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

2. The WACC calculation uses the higher of SL Green Realty'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 SL Green Realty uses a significant proportion of equity capital.