U.S. Physical Therapy - WACC Analysis

U.S. Physical Therapy (Weighted Average Cost of Capital (WACC) Analysis)



Helpful Information for U.S. Physical Therapy's Analysis

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

WACC Analysis Information

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

2. The WACC calculation uses the higher of U.S. Physical Therapy'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 U.S. Physical Therapy uses a significant proportion of equity capital.