Washington Federal - WACC Analysis

Washington Federal (Weighted Average Cost of Capital (WACC) Analysis)

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Helpful Information for Washington Federal's Analysis

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

WACC Analysis Information

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

2. The WACC calculation uses the higher of Washington Federal'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 Washington Federal uses a significant proportion of equity capital.