Union Bankshares - WACC Analysis

Union Bankshares (Weighted Average Cost of Capital (WACC) Analysis)

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Helpful Information for Union Bankshares's Analysis

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

WACC Analysis Information

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

2. The WACC calculation uses the higher of Union Bankshares'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 Union Bankshares uses a significant proportion of equity capital.