First Financial Indiana - WACC Analysis

First Financial Indiana (Weighted Average Cost of Capital (WACC) Analysis)

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Helpful Information for First Financial Indiana's Analysis

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

WACC Analysis Information

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

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