Activision Blizzard - WACC Analysis

Activision Blizzard (Weighted Average Cost of Capital (WACC) Analysis)



Helpful Information for Activision Blizzard's Analysis

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

WACC Analysis Information

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

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