United Natural Foods - WACC Analysis

United Natural Foods (Weighted Average Cost of Capital (WACC) Analysis)

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Helpful Information for United Natural Foods's Analysis

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

WACC Analysis Information

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

2. The WACC calculation uses the higher of United Natural Foods'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 United Natural Foods uses a significant proportion of equity capital.