Ariba - WACC Analysis

Ariba (Weighted Average Cost of Capital (WACC) Analysis)



Helpful Information for Ariba's Analysis

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

WACC Analysis Information

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

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