Texas Industries - WACC Analysis

Texas Industries (Weighted Average Cost of Capital (WACC) Analysis)



Helpful Information for Texas Industries's Analysis

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

WACC Analysis Information

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

2. The WACC calculation uses the higher of Texas Industries'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 Texas Industries uses a significant proportion of equity capital.