BioSphere Medical - WACC Analysis

BioSphere Medical (Weighted Average Cost of Capital (WACC) Analysis)



Helpful Information for BioSphere Medical's Analysis

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

WACC Analysis Information

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

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