Brocade Comm - WACC Analysis

Brocade Comm (Weighted Average Cost of Capital (WACC) Analysis)

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Helpful Information for Brocade Comm's Analysis

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

WACC Analysis Information

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

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