ViewPoint Financial - WACC Analysis

ViewPoint Financial (Weighted Average Cost of Capital (WACC) Analysis)

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Helpful Information for ViewPoint Financial's Analysis

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

WACC Analysis Information

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

2. The WACC calculation uses the higher of ViewPoint Financial'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 ViewPoint Financial uses a significant proportion of equity capital.