Windstream (Weighted Average Cost of Capital (WACC) Analysis)
Helpful Information for Windstream's Analysis
What is the WACC Formula? Analyst use the WACC Discount Rate (weighted average cost of capital) to determine Windstream'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 Windstream. Value Investing Importance? This method is widely used by investment professionals to determine the correct price for investments in Windstream before they make value investing decisions. This WACC analysis is used in Windstream's discounted cash flow (DCF) valuation and see how the WACC calculation affect's Windstream's company valuation.
WACC Analysis Information
1. The WACC (discount rate) calculation for Windstream uses comparable companies to produce a single WACC (discount rate). An industry average WACC (discount rate) is the most accurate for Windstream over the long term. If there are any short-term differences between the industry WACC and Windstream's WACC (discount rate), then Windstream is more likely to revert to the industry WACC (discount rate) over the long term.
2. The WACC calculation uses the higher of Windstream'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 Windstream uses a significant proportion of equity capital.