Adobe Systems - WACC Analysis

Adobe Systems (Weighted Average Cost of Capital (WACC) Analysis)



Helpful Information for Adobe Systems's Analysis

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

WACC Analysis Information

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

2. The WACC calculation uses the higher of Adobe Systems'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 Adobe Systems uses a significant proportion of equity capital.