Urban Outfitters - WACC Analysis

Urban Outfitters (Weighted Average Cost of Capital (WACC) Analysis)



Helpful Information for Urban Outfitters's Analysis

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

WACC Analysis Information

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

2. The WACC calculation uses the higher of Urban Outfitters'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 Urban Outfitters uses a significant proportion of equity capital.