BGC Partners - WACC Analysis

BGC Partners (Weighted Average Cost of Capital (WACC) Analysis)



Helpful Information for BGC Partners's Analysis

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

WACC Analysis Information

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

2. The WACC calculation uses the higher of BGC Partners'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 BGC Partners uses a significant proportion of equity capital.