Sovran Self Storage - WACC Analysis

Sovran Self Storage (Weighted Average Cost of Capital (WACC) Analysis)



Helpful Information for Sovran Self Storage's Analysis

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

WACC Analysis Information

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

2. The WACC calculation uses the higher of Sovran Self Storage'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 Sovran Self Storage uses a significant proportion of equity capital.