BioMimetic Therapeutics - WACC Analysis

BioMimetic Therapeutics (Weighted Average Cost of Capital (WACC) Analysis)



Helpful Information for BioMimetic Therapeutics's Analysis

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

WACC Analysis Information

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

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