White Mountains Ins - WACC Analysis

White Mountains Ins (Weighted Average Cost of Capital (WACC) Analysis)

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Helpful Information for White Mountains Ins's Analysis

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

WACC Analysis Information

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

2. The WACC calculation uses the higher of White Mountains Ins'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 White Mountains Ins uses a significant proportion of equity capital.