Medallion Financial - WACC Analysis

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

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Helpful Information for Medallion Financial's Analysis

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

WACC Analysis Information

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

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