Allied HealthCare - WACC Analysis

Allied HealthCare (Weighted Average Cost of Capital (WACC) Analysis)



Helpful Information for Allied HealthCare's Analysis

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

WACC Analysis Information

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

2. The WACC calculation uses the higher of Allied HealthCare'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 Allied HealthCare uses a significant proportion of equity capital.