AU Optronics - WACC Analysis

AU Optronics (Weighted Average Cost of Capital (WACC) Analysis)

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Helpful Information for AU Optronics's Analysis

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

WACC Analysis Information

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

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