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