Advanced Micro Devices - WACC Analysis

Advanced Micro Devices (Weighted Average Cost of Capital (WACC) Analysis)

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Helpful Information for Advanced Micro Devices's Analysis

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

WACC Analysis Information

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

2. The WACC calculation uses the higher of Advanced Micro 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 Advanced Micro Devices uses a significant proportion of equity capital.