Analog Devices - WACC Analysis

Analog Devices (Weighted Average Cost of Capital (WACC) Analysis)



Helpful Information for Analog Devices's Analysis

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

WACC Analysis Information

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

2. The WACC calculation uses the higher of Analog Devices'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 Analog Devices uses a significant proportion of equity capital.