United States Steel - WACC Analysis

United States Steel (Weighted Average Cost of Capital (WACC) Analysis)



Helpful Information for United States Steel's Analysis

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

WACC Analysis Information

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

2. The WACC calculation uses the higher of United States Steel'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 United States Steel uses a significant proportion of equity capital.