USG Corp - WACC Analysis

USG Corp (Weighted Average Cost of Capital (WACC) Analysis)

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Helpful Information for USG Corp's Analysis

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

WACC Analysis Information

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

2. The WACC calculation uses the higher of USG Corp'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 USG Corp uses a significant proportion of equity capital.