Titan Machinery - WACC Analysis

Titan Machinery (Weighted Average Cost of Capital (WACC) Analysis)



Helpful Information for Titan Machinery's Analysis

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

WACC Analysis Information

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

2. The WACC calculation uses the higher of Titan Machinery'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 Titan Machinery uses a significant proportion of equity capital.