Time Warner Cable - WACC Analysis

Time Warner Cable (Weighted Average Cost of Capital (WACC) Analysis)



Helpful Information for Time Warner Cable's Analysis

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

WACC Analysis Information

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

2. The WACC calculation uses the higher of Time Warner Cable'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 Time Warner Cable uses a significant proportion of equity capital.