Universal Health Realty - WACC Analysis

Universal Health Realty (Weighted Average Cost of Capital (WACC) Analysis)



Helpful Information for Universal Health Realty's Analysis

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

WACC Analysis Information

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

2. The WACC calculation uses the higher of Universal Health Realty'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 Universal Health Realty uses a significant proportion of equity capital.