Watts Water Tech - WACC Analysis

Watts Water Tech (Weighted Average Cost of Capital (WACC) Analysis)



Helpful Information for Watts Water Tech's Analysis

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

WACC Analysis Information

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

2. The WACC calculation uses the higher of Watts Water Tech'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 Watts Water Tech uses a significant proportion of equity capital.